In a recent LinkedIn post, I encountered the concept of corporate vulnerability, which struck a chord with many of the challenges facing the gold industry. There’s a notable absence of transparency and traceability, with companies portraying themselves as flawless entities. This has led to harmful competition where refineries vie to position themselves as the most responsible gold sources in the market. Some even claim carbon neutrality in scope 3 emissions across their entire supply chain, despite primarily sourcing gold from pawn shops and cash-for-gold schemes. Interestingly, these companies conveniently omit any mention of pawn shops or cash-for-gold establishments from their vocabulary. This situation mirrors the concealment of the late queen’s disabled cousins, who were declared dead in 1963 while being hidden away in an asylum. European gold refineries seem hesitant to acknowledge or associate themselves with pawn shops and cash-for-gold businesses on their websites or ESG reports. Luxury jewelry and watchmakers likely want to distance their brands from such commerce and the associated risks. The industry’s tactic is to make it appear that recycled gold originates directly from refineries rather than from pawn shops or cash-for-gold outlets.
If a company or institutional leaders opt to bolster their marketing teams to create an illusion of traceability and responsibility while disregarding the inherent risks associated with sourcing gold from pawn shops and cash-for-gold schemes, a significant issue arises. It would demonstrate greater responsibility and honesty to acknowledge the problem, assess its magnitude, and initiate the search for potential solutions. Recycling gold refineries presents an attractive facade masking a less glamorous supply chain where traceability is virtually nonexistent. Situated typically in developed nations, these refineries boast exquisite architectural designs and cutting-edge facilities. Merely observing this segment of the supply chain might easily convince one that the so-called recycled gold adheres to the highest KYC (Know Your Customer) and traceability standards in the market. However, conducting a basic supply chain mapping exercise would reveal the disconcerting fact that this purportedly recycled gold primarily originates from pawn shops and cash-for-gold schemes. Only gold aggregators serve as intermediaries between the refineries and these commercial outlets. Technically, the refineries purchase gold from gold collectors rather than directly from pawn shops.
The remedy for this predicament is straightforward: embracing vulnerability.
A company and its leadership must first acknowledge there is a problem and hiding the problem is definitely not the way to go. Then find possible solutions and alternatives to the problem and recognize that finding traceable gold in the gold market is extremely rare and difficult. These gold refineries need to enhance communication especially with their clients to appropriately disclose the inherent risks associated with sourcing the so-called recycled gold the consequences for not doing so could have harsh reputational damages clients are going to feel they have been scammed or at least that crucial information has been conveniently not disclosed.
The promotion of recycled gold as eco-friendly is flawed due to its lack of traceability, casting doubt on any associated claims. A clear remedy for this $160 billion yearly greenwashing problem is straightforward: companies unable to ensure traceability from the moment an individual sells their used gold jewelry to a pawn shop or cash for gold scheme should abstain from making assertions. Instead, they should openly acknowledge the gold’s unknown origin. Efforts to offset carbon emissions or assert sustainable sourcing from such gold should be completely avoided. Claims of responsible or sustainable sourcing stemming from recycled gold are simply falsehoods and should be eradicated.
To be honest there is not much ASM gold to supply the entire market but there are companies in the technology luxury watch and jewelry sector that can easily afford to incorporate traceable gold from ASM gold in their supply chains their products usually have contribution margins that surpass 1000% of its gold value. A premium for traceable gold won’t dent their profits. Once again, we meet with corporate invulnerability some of the upstream companies want to avoid this uncomfortable subject and would rather source the so-called recycled gold as long as the words pawn shops and cash for gold schemes are never related to their purchases. The so-called recycled gold can liberate these companies to be associated with the activity of gold mining even if this so-called recycled gold was technically produced from gold that was mined 15 days before. They can use and abuse the term recycled with its all-forgiving aura. Additionally, this is the cheapest source of gold available in the market it’s the status quo there is no premium because practically the majority of the gold that is being processed by the LBMA refineries comes from “recycled” gold sources.
The issue lies in the fact that the recycled gold deceitfull narrative is bound to surface and become mainstream knowledge. What happens then? Companies will find themselves compelled to come clean and elucidate the events of recent decades. They’ll have to concede that the only traceable origins of gold stem from mining operations, irrespective of their scale—be it large, medium, small, or artisanal. Recognizing that gold is indeed mined, and that mining processes entail environmental repercussions and the potential for industrial mishaps, is paramount. Companies will need to carefully vet which mines they collaborate with, taking into account factors such as water usage, rock processing, labor conditions, and the societal contributions made by these mines. This necessitates on-site efforts, along with transparency, openness to vulnerability, and a sense of accountability. While Fairmined shines as a beacon of transparency and responsibility, we’re witnessing extraordinary endeavors, such as those led by Aurelia Figueroa from Breitling, who sources gold from the Touchstone mine in Colombia. What’s becoming evident through the establishment of supply chain traceability is that gold refineries could potentially become obsolete in the supply chain. The spotlight would then appropriately shift to the mines rather than being fixated solely on the gold refinery.
Embracing vulnerability may pose challenges, yet it stands as the sole path forward amidst this swiftly evolving landscape. The gold industry, far from perfect, risks exacerbating its problems by concealing realities, reminiscent of how the late queen obscured the existence of her disabled cousins, even declaring them deceased while they lived in seclusion. The current dissemination of information is dismantling outdated and harmful narratives, opening avenues for fresh perspectives and approaches. Ideally, these will prioritize vulnerability and transparency within a market that often portrays itself as faultless.