Contrasting Realities: The Untraceable, Complex World of Recycled Gold vs. The Transparent Fairmined Supply Chain
The effort put into sustaining the Fairmined initiative is remarkable. The initiative has developed a comprehensive and robust standard over years of work in mining regions across Africa, Asia, and Latin America. This experience has allowed them to establish a strict yet feasible standard ensuring complete traceability and the highest environmental and social standards in the gold market. The Fairmined initiative focuses on the supply chain’s origin, often the most challenging part, conducting numerous onsite visits and meticulous verification of standards. Consequently, there are only eight Fairmined certified mines globally, reflecting the initiative’s commitment to quality over quantity.
The Fairmined standard involves three critical certification roles within the supply chain:
1.The mine (currently, 8 certified mines)
2.The first authorized buyer (comprising 14 such buyers)
3.The licensee (specifically for jewelry)
This streamlined structure with just three roles greatly facilitates traceability and transparency. A shorter supply chain significantly lowers the risk of contamination. Additionally, the advanced Fairmined Connect traceability software meticulously monitors every gram of gold from the certified mines right up to the licensee, ensuring complete oversight.
Tracing the Untraceable: The Complexities of Recycled Gold’s Supply Chain
Implementing a traceability standard for recycled gold, which accounts for over 55% of the gold processed by LBMA refineries, could present several challenges, mainly in traceability. The proposed standard for recycled gold would involve several key stages:
1.Pawn shops and cash-for-gold collectors
2.Gold smelter collectors
Each stage introduces potential complications in maintaining a consistent and transparent traceability chain for recycled gold.
1.Pawn Shop/Cash for Gold Collector
In the Fairmined standard, the origin point is the mine, but for recycled gold, it’s challenging to pinpoint such a specific source. Typically, recycled gold comes from individual persons selling their used or broken jewelry. It’s impractical to certify each individual seller, so the focus shifts to auditing the initial point of collection in the recycled gold chain. This is usually a pawn shop or a cash-for-gold shop, where individuals commonly sell their used jewelry.
The role of a gold smelter collector is pivotal in the traceability and transformation process of recycled gold. They purchase lots of used jewelry from pawn shops and cash-for-gold shops, converting this jewelry into gold bars. However, this transformation process is susceptible to various challenges, including the potential contamination of gold from other sources. To maintain the integrity of the standard, it’s essential to minimize the number of actors in the supply chain. Typically, gold smelter collectors in developing countries sell their smelted gold bars to local gold aggregators. These aggregators specialize in international trade, often mixing gold from various sources and shipping it to major gold trade hubs like Miami and Dubai. This adds additional layers to the supply chain, potentially including two more actors, which can complicate traceability.
At this phase, gold bars undergo refining to become pure gold, and here, the illusion of traceability and transparency is often conjured. It’s at this point where many jewelry and electronics firms claim the gold’s origin, conveniently ignoring the earlier stages of the supply chain
Implementing a traceability standard for recycled gold is a formidable task. It requires establishing stringent controls at the most vulnerable points of the supply chain, namely pawn shops, cash for gold shops, gold smelters, and gold aggregators. These entities, potentially numbering in the thousands globally, face challenges in implementing effective Anti-Money Laundering (AML) systems, managing inventory, and ensuring the segregation of recycled materials. To effectively track recycled gold, a technological solution akin to the Fairmined Connect system is essential. Such a tool would meticulously record every transaction, starting from the initial sale at pawn shops or cash for gold shops, and trace the gold through the entire supply chain to the jewelry manufacturer. This comprehensive approach ensures every gram of gold is accounted for, enhancing transparency and accountability in the recycled gold supply chain.
The task of tracing the origin of recycled gold is formidable. Most leading recycled gold standards simplify the process by focusing solely on the most established link in the chain – a well-established gold refinery. These standards typically audit only the refinery and identify its direct supplier, often a company in a gold trade hub. Only the gold refinery is equipped with a robust management system, experienced managers, and Anti-Money Laundering (AML) systems. This limited scope marks the extent of traceability in the recycled gold supply chain. Furthermore, any transactions beyond the refinery are not accounted for in the existing traceability standards, effectively rendering them nonexistent within the traceability framework.
The risks associated with sourcing recycled gold can be further explained in the following link: Recycled gold risks
In stark contrast, the Fairmined standard involves a more comprehensive and accountable approach, encompassing 8 authorized mines and 14 first authorized buyers. This shorter, more transparent supply chain ensures every involved actor undergoes periodic independent audits, with strong management and inventory systems in place, even at the most vulnerable point – the mine. For organizations seeking genuine traceability, transparency, and a stringent standard to confidently ascertain their gold’s source, Fairmined gold emerges as the preferable choice.