Jan 19 2014, 4:32pm CST | by Forbes
In an interview with Michael J. Kowalski, Chairman of the Board and CEO of Tiffany & Co., we discussed corporate social responsibility, ethical sourcing and responsible mining, lessons in leadership, and much more.
Rahim Kanani: When you think about corporations in the jewelry business, particularly of the size and stature of Tiffany & Co., what kinds of issues or challenges come to mind?
Michael J. Kowalski: A company of the size and stature of Tiffany & Co., operating in a highly fragmented and largely “unbranded” jewelry marketplace, confronts both the benefits and challenges of industry leadership. We clearly have the resources to do what few in the industry can do in terms of building a secure, vertically integrated supply chain, including cutting and polishing most of our diamonds and crafting a large percentage of our jewelry in Tiffany workshops around the world. But we also face a deservedly higher set of expectations than many of our less famous competitors do. The power of the Tiffany brand provides us with both opportunity and responsibility.
Kanani: Recently, you’ve talked about ethical sourcing and responsibility being integrally tied to the brand promise of Tiffany & Co. What did you mean by that?
Kowalski: I would like to think that the majority of consumers are genuinely concerned about ethical sourcing. But candidly, such concerns are rarely “top of mind” when considering the purchase of jewelry. Nevertheless, I do believe that Tiffany customers trust, either explicitly or through assumption, that Tiffany – as part of our brand promise – has in fact attended to those concerns. That promise begins with an assurance that the materials were sourced and crafted responsibly, including the use of recycled precious metals and a focus on mines that minimize impact on the environment and respect human rights. It also includes an effort to provide economic opportunities beyond mining in developing countries that host mining operations. For many of our customers those promises may be implicit, but it makes them no less real. And should we fail to deliver on those promises, the damage to our brand will most certainly be real.
Kanani: What are some of the efforts or initiatives you’re currently involved in and how are you working with other sectors–for example civil society–to address the concerns of human rights and environmental activists?
Kowalski: Right now among our most important initiatives is our work as a founding member of IRMA, the Initiative for Responsible Mining Assurance. We believe the jewelry sector is in desperate need of an independently verifiable mining assurance system that establishes rigorous standards for social and environmental performance. These should include mine location standards that preserve ecologically and culturally significant areas, rigorous environmental management standards, strong protection for workers and affected communities, and corporate governance standards to assure transparency in revenue payments from companies to governments. IRMA is in the final stages of standards development and we are hopeful it can become an assurance system that is widely embraced by all segments of the jewelry industry, civil society, and most importantly by consumers.
We are also engaged in opposing the development of the Pebble Mine in southwest Alaska’s Bristol Bay region. The mine poses a dire threat to the region’s pristine, highly productive ecosystem that supports the world’s most important salmon fishery, and is broadly opposed by a coalition of local communities, sport and commercial fisherpersons, and conservation organizations. We have long believed that there are certain special places where mining simply should never take place, and we are working to make the retail jewelry industry and jewelry consumers aware that Bristol Bay is one such place. We are also urging the U.S. Environmental Protection Agency to use its authority under the Clean Water Act to prohibit mine development there.
Finally, we believe that the Kimberley Process, which has had great success in largely eliminating conflict diamonds from the global diamond trade, needs to be strengthened.
We believe the definition of conflict diamonds needs to be expanded to enable the Kimberley Process to address diamond related human rights abuses wherever they occur.
Kanani: Are your consumers demanding to know more about where and how your jewelry was sourced? In other words, how much of your efforts are consumer driven versus conscious driven?
Kowalski: Consumers are most certainly demanding to know more about where and how our jewelry is sourced, although those consumers represent a still small but rapidly growing minority. And while we certainly have a deep moral commitment to act responsibly – a commitment which emanates not just from myself or the senior management group but from all our Tiffany colleagues around the world – we also believe we have a business imperative to act responsibly. We have always prided ourselves on managing Tiffany & Co. for the long term. Witness our storied 177 year history. And over the long term, we have no doubt whatsoever that consumers will increasingly demand responsible behavior, and that effectively meeting that demand will be a source of brand differentiation and ultimately lead to the creation of long-term shareholder value.
Kanani: Moving forward, how would you like to see Tiffany & Co.’s role in this space evolve over the next 5 or 10 years?
Kowalski: In a perfect world, Tiffany & Co. itself would have a completely transparent supply chain, based on the direct acquisition at the mine level of all our gemstones and precious metals and the manufacture of all our jewelry in Tiffany controlled or closely monitored workshops. But much works remains to be done before we can achieve that. At the mine level, I would hope we continue to source from mines that meet only the highest standards for social and environmental responsibility. Our sourcing strategies should also reflect the fact that the communities that host mining need to receive a fairer share of the downstream profit in the jewelry industry.
I would hope Tiffany could play an important role in developing mining standards (as we are through the IRMA effort) that protect the environment, communities, and workers while at the same time recognizing that our business depends upon a healthy mining industry. I would hope that we would continue to be a voice for progressive industry regulation, including here in the United States the reform of the 1872 Mining Law, and that we would continue to use the power of the Tiffany brand to oppose new mine development in environmentally and culturally significant areas.
More broadly, I would hope we would be part of an enlightened corporate movement that recognizes the clear and present danger of climate change, and supports aggressive government action – whether through regulation or taxation – to address that threat.
Kanani: Finally, as someone who has been CEO for nearly 15 years, what are some of the leadership lessons you’ve learned along the way in trying to tackle some of these societal concerns from a business perspective?
Kowalski: Lesson number one is the importance of acknowledging in a clear, unequivocal manner the many challenges that confront any business that is fundamentally dependent upon precious metal and gemstone mining. Many jewelry customers may indeed prefer not to know too much about those troubling realities of mining, and so corporate willful blindness and obfuscation can indeed be tempting strategies. But customers deserve to know the ramifications of their purchase decisions, and it is this knowledge and the choices it inspires that can empower those in the industry making the case for responsible behavior.
Second, while many in industry recognize both the business and the moral imperative to act responsibly, the sad truth is that activism, or the threat of activism, focuses attention and drives action. I have learned to recognize that the spotlight that civil society can shine on irresponsible behavior is a powerful ally for progress.
Finally, in terms of organizational development and culture, the strongest support for our social and environmental initiatives comes from our own Tiffany employees, our Board of Directors, and our shareholders. There is an immense sense of pride in what the company has tried to accomplish and a belief that we can find a place where moral imperatives and business imperatives act synergistically to create an effective model for responsible behavior.
Source: Forbes Business
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