The Kimberley Process : lost its shine : an analysis on the weaknesses in its implementation

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An analysis on the weaknesses in its implementation

Floor Oudendijk (10262377)

dr. F. Boussaid & dr. L.W. Fransen

24 June 2016

Master thesis Political Sciences: International Relations

ABSTRACT

The main purpose of this thesis is to identify the weaknesses of the implementation of the Kimberley Process, a voluntary certification scheme focusing on minimizing the amount of conflict diamonds. In order to investigate the main question in a qualitative manner, the pre-implementation stage of the Kimberley Process is investigated on contextual variables that might have influenced the implementation, as well as the actual implementation. Through inter alia the use of interviews and policy papers, the implementation of the Kimberley Process in the European Union is explained, next to the challenges since implementation. It is concluded that the weaknesses of the

Kimberley Process have their origin in the pre-implementation phase; the certification scheme is not binding, the decision-making process is through consensus and the stakeholders are too polarized. Consequently, the Kimberley Process is now at a critical point, where it has been unable to evolve to address problems of non-compliance and the narrow definitions.

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Introduction

Western states allocate billions of euros every year to developing states as foreign direct aid with the objective for these states to develop. The aid is mostly focused on development of a state, such as investing in education and infrastructure (World Bank, 2013). However, aid is believed sometimes to be ineffective (Collier, 2003). This is especially the case when there is civil conflict. Civil conflict causes fatalities and the destruction of facilities, which is counterproductive to development aid. However, what if the western states affect the duration of civil war?

In the 1990s the African continent was characterized by civil wars. These took place in the Democratic Republic of Congo (DRC), Angola, Cote d’Ivoire, and Sierra Leona. These civil wars were more had a higher occurrence in states that had diamond mines (Ross, 2014). From the diamond profits they were able to purchase munitions, hence the name of blood diamonds for these gems. Blood diamonds or conflict diamonds are defined by the General Assembly of the United Nations (UN) in the following way: “rough diamonds which are used by rebel movements to finance their military activities, including attempts to undermine or overthrow legitimate Governments” (UN Resolution 55/56, 2002:1)

These practices of selling diamonds to finance conflict have resulted in lower development in the diamond producing states in two ways: firstly, the civil war has an influence on for example, the productivity and investors and thus on the development within the state borders (Rosser, 2006; Ross, 2014). In addition, the government usually is very dependent on the diamond sector and its income. In other words, its economy is not diversified, which is also an indicator of the resource curse. With the rebels occupying the mines, the economy as a whole stagnated in these war torn states.

Naturally, the demand for diamonds originates largely from Western countries, such as Belgium and the United Kingdom. This implies consumers can affect the supply of the blood diamonds, too. In order to inform consumers more

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thoroughly on the origins of the diamonds, diamond-producing states initiated a meeting in Kimberley, South Africa, in 2000 in order to create the Kimberley Process Certification Scheme (KPCS). The purpose was to find a manner to minimize the amount of conflict diamonds entering the global market in a certification scheme that is not legally binding (KP, 2016). In the Kimberley Process participants certify only rough diamonds that are not mined by rebels. In addition, the participants can only trade amongst each other when certification is present (Kimberley Process, 2002). Although this seems like a good way to ban the conflict diamonds, critics have identified several weaknesses in the certification.

The goal of this thesis is to understand whether this certification scheme has been successful in its aims and what the differences of implementation and execution are between states. I will focus on the consuming states. An unsuccessful certification scheme conflicts with the billions of euros in aid consumer states provide because the ‘consumption’ of diamonds also influences the producing states, most likely in a negative way. In addition, the diamond trading industry is more powerful in Western States (e.g. Antwerp and London). In order to understand the current weaknesses of the Kimberley Process, an analysis of the influence of the stakeholders in the negotiations is necessary.

Recent literature on the Kimberley Process emphasizes the role of the producing states (Cullen, 2013; Grant, 2012; Lecomte, 2015). However, if consuming states have another influence that counteracts with the aid giving, this should be investigated. Moreover, literature on the voluntary certification schemes focuses on the stringency and the adaptation of voluntary certification schemes. In order to look at the success, it is important to look at the regulations of the Kimberley Process, as well as its implementation and the overall stringency in the Process. I have put these intentions in the following question: What are the weaknesses in the implementation of the Kimberley Process?

In order to be ale to answer this question it is important to understand what the field of Voluntary Certification Schemes has focused on regarding the reason for a sector to engage in a certification scheme. Furthermore, it is of importance to see

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which stakeholders or which contexts could influence the final certification scheme that would be implemented. By using the literature on Voluntary Certification Schemes, a framework able to predict whether the Kimberley Process is more likely to have great weaknesses in the implementation based on contextual variables can be designed. These contextual variables are

The structure will of the thesis will be as follows. Firstly, I will address the literature on Corporate Social Responsibility (CSR) that is applicable to the Kimberley Process. Hereafter, I will discuss the literature on stringency within the voluntary certification schemes based on the literature that considers cases. I will explain the conceptual framework and its limits. Hereafter, I will focus on the methods that I have found appropriate to investigate the differences in execution within the European Union. Furthermore, I will discuss the legislative nature of the Kimberley Process and the basic regulations that are in place for the Participants. Then, I will start with the actual analysis of the thesis. In the first part of the analysis I will address the contextual forces that might have influenced the stringency of the Kimberley Process Core Document. These contextual forces are the involvement of NGOs, the characteristics of the sector and lastly the support of the government (Fransen & Burgoon, 2012). After that, I will focus on the implementation and the execution in the Belgian Union Authority and identify weaknesses that might be. In addition to this, I will conclude with policy recommendations for both the European Union as Participant of the Kimberley Process and the process as itself. Lastly, I will give recommendations to the European Union and the Kimberley Process as to how the Kimberley Process can be improved and to point out what the limitations to this thesis are.

Literature review

The consumption of diamonds in western states still creates a market that allows blood diamonds to exist: the European Union was amongst the greatest importers of diamonds in 2014 and the greatest exporter (Kimberley Process, 2014). Hence, a great demand for diamonds in these consuming states still exists. Consequently, it is interesting to focus on the consuming states. This section will

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address literature explaining the relation between consuming states and field of Corporate Social Responsibility (CSR) and why the corporations would comply with regulations like the Kimberley Process.

Within the field of CSR there is still no consensus on the definition of CSR (McWilliams et al., 2006). It is a broad field that includes the influence of CSR on environment and the influence of international political organizations on CSR policies (Broomhill, 2007). However, this thesis emphasize will be on what Dupire and M’Zali (2016) call the strategic altruistic debate. It has been a relatively old debate amongst CSR scholars revolving around the question ‘what motivates corporations to move to CSR policies’.

In this debate Garriga & Melé (2004) have identified four theories for explaining why corporations to engage in CSR policies. Firstly, there are authors that view CSR as “[…] means to an end” (Garriga & Melé, 2004:52). Hence, corporations view CSR as a strategy to maximize the profit or to have competitive advantages over concurrence (Friedman, 1970; Petrick & Quinn, 2001). Hence, corporations would turn to CSR for their self-interest. This perspective has received the most attention in the literature (Garriga & Melé, 2004).

Secondly, there are the views that Garriga and Melé (2004) have identified as integrative theories. In short, these theories assume that the corporations integrate the wishes from society. Consequently, the responsibilities of the corporations are not clear-cut and can change over time based on what society expects (Preston & Post, 1975).

Thirdly, the authors within the ethical theories argue corporations engage in CSR due to and solely because of ethics and their beliefs (Garriga & Melé, 2004). Hence, in this perspective, there is an emphasis on corporations contributing to society, as there is the assumption that there is the common good: “This approach maintains that business, as with any other social group or individual in society, has to contribute to the common good, because it is a part of society” (Garriga & Melé, 2004:62). This line of thought is the one that is the most philosophical in comparison to other three.

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Lastly, there are approaches that include the interactions of corporations and the society, also including political interests (Garriga & Melé, 2004). Also this line of thought also has a long history, but since 2000 there has been a renewed interest in “corporate citizenship” (Matten et al., 2003).

Scherer & Palazzo (2011) agree with Garriga & Melé (2004), stating that attempts have been made on identifying incentives for CSR. However, these attempts have been limited, as the emphasis has been largely on the instrumental perspective of CSR (Scherer & Palazzo, 2011). Certain assumptions, that, amongst others, Friedman (1970) used for his analysis has lost validity. One of these assumptions is the strict distinction between corporations and state, as well as society (Scherer & Palazzo, 2011).

There are certain trends that are at the basis of the lower validity of these assumptions. Amongst others, there is the decline of the nation state due to globalization. Moreover, in the light of globalization, Scherer and Palazzo (2011: 905) pose: “[…] corporations today are able to choose among various legal systems. Applying economic criteria they choose the optimal context of labour, social, and environmental regulations for their operations”. Consequently, the multinational corporation can not anymore only be seen as a private actor.

As a result of these aforementioned trends, Scherer & Palazzo (2011) found that there are new emphases within the field of CSR. One of these new emphases is the shift from states’ increased focus on soft power (opposed to hard power) and increased self-regulation of the corporations. Héritier & Eckert (2008) pose that although it seems that some corporations or sectors turn to self-regulation themselves, this might not always be the case, as there is always the threat that the legislator imposes stricter rules. Hence, corporations would engage in self-regulation in order to avoid imposed sanctions or rules by governments. However, there are also examples of CSR where the corporations aim to set regulations, when governments are unwilling or unable to (Scherer and Palazzo, 2011; Shelton, 2000).

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Hence, what has become clear is that (transnational) sectors have become political stakeholders and not only economic ones (Scherer & Palazzo, 2011). The diamond sector engaged in the Kimberley Process acted as economic as well as political stakeholders. This new alternative for why corporations engage in CSR policies is still relatively unexplored, as well as what the influence is of the government and civil society. Thus, this thesis might contribute in giving new insights on the influence of these other stakeholders. The research will focus on the evaluation of the voluntary certification scheme, as a self-regulatory regulation in the diamond sector.

Now, I will turn to the theoretical framework, in which the concepts and the operationalization for the analysis are addressed.

Theoretical framework

In this section the concepts that will be used for the investigation of the implementation of the Kimberley Process will be addressed. Eventually, it will give the tools to assess the shortcomings of the Kimberley Process in the implementation. In the literature, the focus was on why corporations might choose for self-regulatory measurements. Hence, implicitly it incorporates the notion that corporations consciously decide how to engage with CSR and more specifically self-regulatory systems. In the following section voluntary certification schemes will be addressed, looking at contexts that might steer a corporation or in the case of the Kimberley Process, a sector to a regulation system. The stringency, hence the strictness, of the regulation system might also be influenced through other stakeholders.

The Voluntary Certification Schemes

This chapter focuses on the literature on certification schemes. Voluntary certification schemes are in place in several sectors (Auld et al, 2008). The literature on the voluntary certification schemes will give indices on which variables can be used to measure stringency and thus the influence of this stringency on the implementation of the Kimberley Process.

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Stringency: the pre-‐implementation framework

Stringency is one of the important concepts in this thesis. Auld et al (2008) state the following on the possible relation between adoption of the sector and the stringency: “On the one hand, the more stringent the standards, presumably, the greater the behavioral change among certified producers. On the other hand, producer desire for control and flexibility may lead to faster uptake of less stringent systems” (Auld et al, 2008:198). In this sense, stringency is only limited to the stringency of the standards and its prescriptiveness.

It is for this reason that for this thesis the definition of stringency of Fransen and Burgoon (2012), which is deemed to be more comprehensive. Their definition consists of a combination of three variables, namely the degree of (labor) standards adopted, the specificity of the prescribed implementation and the degree to which stakeholders are allowed to review. Each of these three variables is measured by four indicators. Due to the fact that some of the variables are not clearly defined in the article or not applicable for the Kimberley Process, there have been some adjustments from the original framework. It is of importance to note that this framework will be treated as pre-implementation and forms the basis of the evaluation of the implementation of the Kimberley Process. The variables proposed by Fransen and Burgoon (2012) can be found in the table below.

Variable Measured by Range

Degree of adoption of labor standards

Comprehensiveness of standard

Narrow to broad

Standard formulation Lax to stringent Specificity of the content Unspecific to specific Reference to other

codifications

Not specific to specific on core documents

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Table 1- Fransen and Burgoon (2012) framework on stringency, *= changed from numerical to ordinal variable

Contextual variables: what and who influences stringency?

Characteristics of the industry

Auld et al. (2008) focus on the forest and forestry certification schemes. Although this is a different sector than the diamond industry, the context of the initiation of the certification is similar. Firstly, there was a growing concern amongst civil society organizations NGOs and international organizations, such as the UN (Auld et al, 2008). However, the intergovernmental negotiations were not successful and thus the NGOs needed to find other alternatives for certification.

1_{Fransen & Burgoon (2012) use this governance policy variable that encompasses ten}

variables. I will not be able due to practical reasons and the fact that the other variables, in my opinion already can measure the specificity of the implementation. In addition to that, in the second part of the analysis, the implementation is addressed more thoroughly.

Specificity of the

implementation

Governance policy tools Ten different variables 1

Scope of requirement Factory level-specific supplier-whole supply chain

Degree of requirements are discretionary Low to high* Specificity of implementation policies Low to high* Degree of review of regulations Decision-making and governance within the organization

Low to high*

Monitoring of

performance at factory site

Low to high*

Review and revisions performed

Low to high*

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Auld et al (2008) have identified different context-dependent variables that have influenced the adoption of a certain forestry certification scheme, with the assumption in mind that higher adoption means lower stringency.

Firstly, there are the characteristics of the product and the market (Auld et al, 2008). Whenever the product is at the end of the market or is in a niche market, the producer might want to differentiate from others in the market, a finding that is shared with Fransen and Burgoon (2012). Moreover, Fransen and Burgoon (2012) add to this that sellers within a supply chain could potentially prefer a less stringent framework, as they are not directly concerned with the production. In addition to these aspects, there is the trade dependency; stating that when there is more trade with the European Union and Northern America, there is more of a chance that a sector would certify (Auld et al, 2008). Hence, implicitly it is taken into account that producer to consumer products have more chances of to be certified, which is in line with what Dupire & M’Zali (2016) found. Lastly, Auld et al (2008) find that when the sector is united through an association, there is more chance of a sector to impede certification or lower the stringency of the certification.

Involvement of civil society and NGOs

In both Fransen & Burgoon (2012) and Auld et al (2008) the importance of NGOs and civil society is high. NGO can pressure certain groups of the industry to change their procedures. Auld et al (2008) state that one way to deal with the pressure of NGOs is to initiate a certification scheme. Fransen & Burgoon (2012) found that in the clothing supply chain the pressure of activist groups would lead to more stringent certification schemes. This pressure would not only be through campaigning, but also through the media and consumer, a leading industry could be tempted to a more stringent certification scheme (ibid.).

National support

Auld et al (2008) mention that one of the chances of having better adoption of the certification schemes is by adoption of a specific certification scheme. The governments on the consumer side of the product sometimes engage in public procurement policies, regulating the market.

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In line with this, Gulbrandsen (2009) stated on the Marine Stewardship Council that the government could play an important role for the sector for the commencement of a certification scheme: “if governments believe that certification is vital for the economic viability and market access of the fishing industry, they may take the initiative to change management rules to allow for the certification of fisheries” (Gulbrandsen, 2009). Hence, there has to be some national political will in order for a certification scheme to originate and to be strict, as governments can facilitate conditions to support a certification scheme. Fransen and Burgoon (2012) take the role of the government also into account in the national environment is positively related to the stringency of the certification scheme.

In order to be able to investigate whether the Kimberley Process could be considered stringent, I have addressed the literature of other voluntary certification schemes in order to determine the variables that are helpful to analyze the pre-implementation phase. Based on these papers, higher stringency is the result of social pressure by societal groups, some characteristics of the sector and the potential (legal) support of the government.

The Kimberley Process is different than these other certification schemes that have been addressed above; states are Participants in the Kimberley Process (Kimberley Process, 2002). However, the diamond sector has specific There are aspects of the Kimberley Process, such as the advisory role of the sector and the fast track monitoring of the diamonds that make the Kimberley Process very market driven as well.

Implementation

In the analysis I will first focus on whether the Kimberley Process can be considered as stringent in the framework of the voluntary certification schemes. Subsequently, the impact of stringency on the implementation of the Kimberley Process is analyzed to see where the weaknesses are in the implementation.

Thus, implementation theory can, next to the impact of stringency, enhance the theoretical foundation for analyzing the implementation of the Kimberley Process.

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I deem the framework useful due to the fact that it is one of the few that has a good overview of the different sorts of variables that should be measured. However, some of the variables are of less importance to the Kimberley Process, as it is a global framework that has been implemented.

Success or effectiveness of the implementation can be defined as “[a certification scheme] contributing directly to resolving the problem it was created to address” (Auld et al, 2008:188). In the case of the Kimberley Process, this would be the minimization of the percentages of conflict diamonds that enter the diamond consuming market. Conceptually, this would not cause any problems. However, to operationalize the amount of conflict diamonds would be difficult. Conflict diamonds, before and after the implementation, find their way to the market through illicit flows (Ballentine & Nitzschke, 2005). Hence, it will be difficult to compare the numbers before and after the implementation and conclude whether the Kimberley Process has been successful. The framework that will be used for assessing the Kimberley Process is an adjusted framework by Proctor et al (2011). 2

Firstly, Proctor et al (2011) created a framework to evaluate policies in the medical sector. However, the variable that they named “fidelity” seems to be useful for the research. For this variable the difference of the actual execution and the way the process is described in the core document should be analyzed. For this variable, I will largely use the information that has been obtained at the Belgian Union Authority, due to the fact that this is the one of the most influential authorities in the European Union.

Secondly, the other variable that has been proposed by Proctor et al. (2011) that is useful is “sustainability”. This variable should be looked at from a long term perspective and describes whether the stakeholders can identify new challenges and whether they can adapt this in the implementation. This is of great importance for the Kimberley Process, as it can capture whether it is actually adaptable enough for the problems that states encounter in their battle against the illegal diamonds. In addition

2_{Other variables that have been discarded. These were to be measured before and during}

implementation and thus not suitable for the evaluation. Moreover, for the weaknesses in the implementation “fidelity” and “sustainability” were only relevant.

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to this, this variable can be used to see, more than the others, where potential problems related to the implementation of the Kimberley Process are situated and how these might have been solved. Thus, this part of the framework might be of interest to identify the weaknesses in the final implementation and the execution.

Concepts

As I have mentioned in the last section on voluntary certification schemes and the implementation theory, there are certain variables that have a direct influence on the stringency of the voluntary certification scheme. These can be found in the visualization of the pre-implementation phase of the analysis.

Figure 1- visualization of the framework

After the implementation, I will evaluate the Kimberley Process on whether the authorities have been able to fully implement the Kimberley Process (fidelity) and whether there are any constraints to execute the regulations. Lastly, I will also look whether the Kimberley Process has been able to solve difficulties in the process and it has been able to evolve.

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Method

In this part I will discuss more thoroughly the methods that will be used to be able to answer the question on the stringency and the implementation of the Kimberley Process in the European Union.

Case selection

Firstly, it is of importance to address the fact that the Kimberley Process will be used as a single case study. The relevant population of the single case is all the certification schemes. The Kimberley Process can be seen as an extreme case in the sense that unlike other certification schemes it was a relatively quick process. The KPCS only needed two and a half years to be implemented (Haufler, 2009a; Bieri, 2010). This also had to do with the fact that DeBeers company was an oligopoly (Haufler, 2009b). In addition to this, Haufler (2009a) also addresses two characteristics that she deems special to the diamond sector. Firstly, she states that there is a limited amount of sources of the product. Secondly, the diamond sector is extremely sensitive to a change in reputation (ibid.). Consequently, the fast implementation of the diamond sector was necessary to lower reputation damage.

Although the Kimberley Process is in my opinion an extreme case, it still has value to investigate this particular case and to compare it with the other certification schemes. The Kimberley Process was amongst one of the first of the voluntary certification schemes and has many successors in different sectors (Wright, 2004; Stetter & Zangl, 2012). Some of these certification schemes took the organizational framework of the Kimberley Process as a blueprint for the establishment of other certification schemes (ibid.), such as the Extractive Industries Transparency Initiative (EITI) and The International Organization for Standardization’s Technical Committee 207 (Stetter & Zangl, 2012). Hence, the outcomes of this analysis might be relatable to the other certification schemes.

The case study will be of a qualitative nature. Mahoney (2007) stated that qualitative research is of great importance, as it will give more in depth knowledge on

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a particular case. This thesis will hopefully give more insights on the implementation (in the European Union) of the Kimberley Process and therefore, as has been described earlier, on other voluntary certification schemes.

The reason for the emphasis on the European Union can be found in the academic field, as well as for practical reasons. There has not been attention for the execution and implementation in western states of this certification (Cullen, 2013; Grant, 2012; Lecomte, 2015). In addition to this, the focus on the European Union also is due to validity. The Kimberley Process leaves space for interpretation amongst the participants of the certification scheme (Stetter & Zangl, 2012). Therefore, there are some small differences amongst the participants of the Kimberley Process in their legislative framework. However, the European Union and its Member States all have the same framework, as it participates as one unit (European Commission, 2015). It is therefore interesting whether there are internal differences and whether the regulations of the Kimberley Process still can be executed effectively and the stringency is not affected.

Within the European Union I will focus largely on the Belgian Union Authority. The Belgian Authority can be seen as an extreme case within the European Union. This Authority executes the regulations under the Federal Ministry of Economy (FOD) and is situated in the heart of diamonds, in Antwerp (FOD, 2016). The Federal Ministry already imposed laws and regulations on the diamond sector after the Second World War, aiming to reattach the diamond sector to the city of Antwerp after the atrocities of the World War (FOD official interview, 2016). Moreover, there is also a system in place to screen the financial transactions to counteract money laundering by using diamonds (FOD, 2016). Hence, it can be concluded that the Belgian Authority is an extreme case in the sense of the regulations that were already in place before the Kimberley Process. In addition to this, one of the important reasons to look more thoroughly in the Belgian case is that it advised the European Union greatly on the Kimberley Process (FOD officials interview, 2016). Other Union Authorities were not in the position to comment on their execution.

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Data gathering

The annual reports that the Participants hand in at the Kimberley Process annually give information. However, this does not suffice, as for example the data are aggregated for the EU (Kimberley Process, 2014). It is for this reason that I intend to complement the information that is available with interviews.

For these interviews I have approached Belgian and European Commission officials, as well as several NGOs and the World Diamond Council (WDC). These people are familiar with the execution of the Kimberley Process within the EU on the different levels. The interviews were semi-structured; an interview outline was prepared for each interview with the same questions concerning the implementation and the execution of the Kimberley Process. This interview outline can be found in Annex I. The outline exists of both questions on the specific responsibilities of the service, as well on the standardized questions on the Kimberley Process and a personal opinion on its implementation and execution. In Annex II the list of interviewees can be found.3

Lastly, it is true that the validity of the investigation is under scrutiny when one uses the snowball manner of finding interviewees. However, due the amount of refusals through direct contact, it was very difficult to engage in another method to gain contacts. Hence, it is for rather practical reasons that these persons were approached and interviewed. To go about this problem, I aim to complement and compare the information of the interviewees with documents and position papers that have been written during the overall Process by NGOs, policy officers and the Kimberley Process.

The framework

The framework has been explained in the previous part of this thesis. For the first part pre-implementation part, I will largely support on the framework that Fransen and Burgoon (2012) have established for voluntary certification schemes in labor regulations within clothing supply chains. The framework in their article is based on a mixed methods approach (Fransen & Burgoon, 2012). As has been mentioned before, this thesis will be of a qualitative nature. I still find that the

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framework is useful for this thesis, as the manner has been set up there is no comparison of initiatives within the analysis on stringency. Consequently, for the explorative character of the research, the framework can be used and the outcomes of the variables could potentially be used for later comparison with other voluntary certification schemes on conflict resources.

For the second part of the research, on the influence that the stringency could have had on the implementation of the Kimberley Process, the framework that has been used by Proctor et al. (2009) will not be used entirely, as some of the elements of the framework are not applicable to the analysis and require a large amount of respondents on the actual execution, something I am not interested in researching.

Kimberley Process

The Kimberley Process has been named after Kimberley, where the first meeting of the Process took place. Kimberley is the oldest diamond mine that was found in South Africa (Kantz, 2007). Countries from the South of Africa that did not deal with civil war, initiated the Kimberley Process, notably South Africa, Namibia, and Botswana. (ibid.) They feared for their position in the media campaigning the NGOs engaged in against the diamond industry. The role of the African states will be discussed more thoroughly in the analysis under the variable that measures the support of the government. In this section, I will briefly address the definitions that are essential to the Kimberley Process. After this, I will shortly discuss the Core Document of the certification scheme and the European Council Regulation Document that followed after the Core Document.

Definitions

As the Kimberley Process entails a great amount of technical terms, it is of importance to investigate them before I will turn to the analysis. Firstly, as already has been mentioned before, only rough diamonds are included in the Kimberley Process (Kimberley Process, 2002). It is only in rough diamonds that the origin, and thus the possibility of it being a conflict diamond, can be detected (Sargentini interview, 2016). In addition to this, only rough diamonds that are used by rebels to finance the battle against the government are included (Kimberley Process, 2002). These aspects

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will be discussed more thoroughly in the next sections, as it has a great impact on the implementation and the later execution of the Kimberley Process.

A “parcel” refers to the batch of diamonds that are transported together (Kimberley Process, 2002). Hence, a parcel could include larger and smaller diamonds at once. Due to the costs to transport diamonds as well as the fact diamonds have a great amount of dealers, it might occur that some diamonds are centered and transported from one central point, these parcels are referred to as “Parcels of mixed origin” and thus include diamonds from two or more different states (Kimberley Process, 2002).

Core Document

Important to note is that the Kimberley Process is not legally binding on a global level (Arribas, 2014). Rather, it is a politically binding agreement (Wright, 2004). Moreover, it has been implemented as such by the Participants by adjusting domestic legislation (Arribas, 2014.). The core document contains definitions, of which the one of diamonds is of importance: the Kimberley Process only involves the rough diamonds under the very specific codes of 7102.10, 7102.21 and 7102.31 of the Harmonized Commodity Description and Coding System (WCO, 2012). In essence, this means that only unpolished and uncut diamonds are considered in the Kimberley Process.

In addition to this, regulations for the Participants are addressed in further sections as well as the characteristics of the certificates are specified in the annexes. Lastly, recommendations are drawn for the Participants as for how to implement the Scheme.

The regulations, also named requirements, can be categorized in four different types. Firstly, there are the requirements concerning the undertakings of rough diamonds in the international trade (Kimberley Process, 2002). In this part the requirements concerning the Participants and trade are specified. Hence, shipment without a Kimberley Process certificate is not allowed (ibid.). In addition to this, it is specified that the Participants can only trade amongst themselves. With the importation of the rough diamonds, the Exporting Authority needs to be informed on the reception of the diamonds in the Importing Authority (ibid.). Moreover, what is

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specified in this section is that during the transport, the parcels are not supposed to make unnecessary stops.

Secondly, there are the requirements that concern the internal controls of the Participants. In this section it is specified how that the legislation of the Participant should be in line with the Kimberley Process, as well as data collection of the domestic diamond market (Kimberley Process, 2002). In addition to that, it is also stated that the diamonds should be transported as safely as possible by utilizing temper-resistant containers. Lastly, what is briefly specified in this section and in the overall Core Document, is that the diamond sector will provide a framework of self-regulation, under the name of the system of warranties. This part of the document will be addressed more thoroughly in the analysis, under the section of the characteristics of the sector.

Thirdly, there are the requirements that address the cooperation and transparency that the certification scheme ought to bring about (Kimberley Process, 2002). In this section it is addressed that the participants should share minimal data on the transactions that are executed. These should be provided to the Chair. What also should be shared amongst the Participants are possible problems, such as fraud in the certificates, as well as the sharing of best practices. Lastly, what is included is the statement that it is tried to seek close cooperation between the customs agencies of the Participants and the law enforcement agencies.

Finally, in Section VI, the administrative matters are addressed (Kimberley Process, 2002). It is specified that annually a Chair should be chosen during the Plenary and that these Plenaries will take place in the country of the Chair. It is also specified that the Participants should hand in annual documents for administrative matters as well as for working group meetings (Kimberley Process, 2002). Once again, it is also specified that in case of non-compliance of other disputes, the Chair should be informed and through discussions there should be sought for a solution. Hence, Participants should reach decision through general consensus (Stetter & Zangl, 2012).

However, what is not specified is how to implement the Kimberley Process specifically. In the Annexes, some recommendations are made for the states

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concerning legislation and implementation (Kimberley Process, 2002). In the next section I will focus on the case of the EU, as within the analysis the European Union will be taken as an example.

European Council Regulation 2368/2002

In Regulation 2368 the Kimberley Process is specified and implemented by the European Union. What is of importance to address is that the European Union is seen as one entity. As a consequence, the trade of diamonds that is practiced amongst the members of the European Union is not considered as transport between Participants of the certification. The execution of the exports and imports of diamonds in the European Union is therefore done by six Union Authorities (EC/2368, 2002). These Authorities are appointed by the European Member States, notably Belgium, Portugal, the Czech Republic, Germany, Romania and the United Kingdom (Kimberley Process, 2016). To clarify how the system works; if the Netherlands imports the diamonds from outside the EU, the diamonds are transported through the Union Authority of Belgium.

The document largely follows the same structure as the Kimberley Process Core Document; it is divided in chapters and subdivided in the articles that specify the regulations (EC/2368, 2002). The definitions are given in Chapter 1. After this the regulations are specified in the following order:

• Import regime (Chapter II) • Export regime (Chapter III)

• Industry Self-Regulation (Chapter IV) • Transit (Chapter V)

• General Provisions (Chapter VI)

There are no significant differences between the Core Document of the KPCS and the Council Regulation of 2002, except for the specified method of implementation and execution in the Council Regulation for the EU with the Union Communities (EC/2368, 2002). It is also described how these Communities should proceed if a parcel of diamonds does not meet the requirements of the Kimberley Process. The exporting state should be contacted for further information. If the

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necessary information is not supplied, the EU can detain the shipment and keep the parcel in custody (EC/2368, 2002).

What is important to note is the self-regulatory aspect that is addressed in both the Core Document and in the European Regulation. This is when the diamond industry has an influence in the execution of the Kimberley Process. In the Annex of the Council Regulation there are several Diamond Bourses indicated within the EU, as well as in the Core Document (EC/2368, 2002). These Diamond Bourses are sworn in and guarantee that they will not trade in conflict diamonds. By trading via the Bourses, there is a so-called fast track procedure possible for the issuance of a Kimberley Process certificate (European Commission, 2015).

Pre-implementation analysis

As already has been mentioned in the method section and in the conceptual framework, there are some contextual variables that could benefit the stringency of the framework before the implementation. The first variable that will be addressed is the characteristics of the sector. Secondly, the involvement of the NGOs that could have influenced the adaption of the certification scheme is discussed. Lastly, the supportive nature of the African states and the European states will be discussed. Then, I will briefly address what would be expected on the stringency of the Kimberley Process. Hereafter, the actual stringency will be determined based on the definition by Fransen and Burgoon (2012).

The characteristics of the sector

Whether the sector is unified would mean that there would be a greater level of success in the adaption of the voluntary certification scheme. However, it could also mean that the stringency of the certification scheme would be lower, as the collective of the industry could influence the negotiation process (Auld et al, 2008). In addition this, there should also be looked at the position of the sector in the relation to the consumer; the lower the economic position of the consumers, the more difficult it would be to adopt the certification scheme for the producers (Fransen & Burgoon, 2012). Moreover, it is also of importance to state that the degree of differentiation of

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the product is influencing the certification. When there a product is largely uniform, it will be harder to differentiate on the product itself (Auld et al, 2008). In order to differentiate, certification could be an option.

Diamonds are high-end products and the market is exclusive due to the limited amount of diamonds that are available (Haufler, 2009). Before the Kimberley Process, diamonds were associated with happiness; they are given during engagements other forms of expression of love (Jens interview, 2016). The sector is greatly dependent on the reputation of diamonds and their business strategies are greatly focused on maintaining the reputation of “tokens of love” (Kantz, 2007:10). Hence, when the NGOs started campaigning, the reputation was damaged and suddenly the diamonds were also associated with blood, conflict and exploitation (Sargentini interview, 2016). Hence, the diamond sector supported the idea of a certification scheme, next to the other stakeholders (Feldman, 2003).

On the unified character of the sector it should be noted that in 2000 DeBeers company that virtually possessed 80% of the diamond sector (Kantz, 2007). Located in London, they regulated the market and also the prices. DeBeers would stock diamonds in order to make the prices go up of the diamonds (Kantz, 2007). As Haufler (2009b: 406) summarizes: “the supply and distribution of rough diamonds was monopolized by De Beers in a highly structured and tightly-knit set of contractual relationships. All the major suppliers cooperated with De Beers to maintain the value of diamonds, which depended so much on the perception of scarcity”. DeBeers, being criticized for these practices, also took the lead to establishment of the World Diamond Council (WDC), a collective of the diamond industry (Kantz, 2007). The WDC fulfills the responsibilities of a spokesperson in the Kimberley Process on the part of the World Federation of Diamond Bourses (WFDB). The WFDB also was and is concerned with the trade and the fair trade of the diamonds (Jens interview, 2016). In addition to this, the WDC also acts as a platform to unite the diamond sector: miners and polishers are invited to the annual meetings (WDC, 2008). Kantz (2007) suggested that the negotiators of Kimberley Process preferred having a central spokesperson in the pre-implementation stage, giving technical advise on the final document that would be used for the implementation in the states. Indeed, it was the

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sector that designed the technical requirements and specifications of the Kimberley Process . For example, they stated that it should only concern the rough diamonds. This is due to the fact that the origins of diamonds can not be traced back when polished or cut (Sargentini interview, 2016)

Lastly, the WDC also interacts with civil society in order to make the diamond sector shift to a more sustainable and ethical manner of profitmaking (WDC, 2008). Within the Kimberley Process they are considered an observer, just like the civil society coalition (Kimberley Process, 2016). Similarly like the civil society, the WDC is also invited to the peer review the participants of the certification scheme (Kimberley Process, 2012).

What should be mentioned is that the other self-regulation mechanisms of the diamond sector goes beyond the certification of the rough diamonds (Kantz, 2007). It also includes the monitoring of parcels of polished and cut diamonds under the so-called System of Warranties (WDC, 2014). Within this system, diamonds that are polished and cut in producing states can not avoid the regulations of the Kimberley Process (ibid.). This system of warranties was established during the Kimberley Process and is aimed to support the Kimberley Process (Kantz, 2007).

Hence, what can be concluded on this variable that influences stringency is that the characteristics of the product in terms of position in the market were beneficial to the initiation of a certification scheme; there was reputation damage and diamonds are part of the high end industry, making it able to differentiate, in line with what Auld et al (2008) stated. In addition to this, the influence of the WDC was clear in the negotiations, giving technical advice to avoid “red tape”, strict regulations (Sargentini, 2016). Hence, in the case of the Kimberley Process the role of the industry in the form of the collective WDC was clear: the certification scheme was needed, but with low stringency.

The historical involvement of the NGOs

In 2000 there were several reports by the NGOs issued on the civil wars that swept Africa, such as in Sierra Leone and the Democratic Republic of Congo (DRC). In these reports the role of the diamonds was discussed on (Feldman, 2003). Global

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Witness (2000) claimed that there were rebels were forcing civilians to work for them. The diamonds that were found were used to purchase weapons. In this way, the rebels could continue the fight against the legitimate government. Global Witness was not the only NGO that wrote reports on these atrocities. There were reports by Partnership Africa Canada (PAC), Human Right Watch and Oxfam (Feldman, 2003).

It were these reports and the attention it got, as well as the campaigns that were held, to show that there was a discrepancy between the perception of the western world of diamonds and the reality in the producing states. “All of a sudden the exclusive perception of diamonds, was diluted by the reality that the NGOs gave us: the reality that diamonds were infected: blood, slavery and civil war were part of diamonds as well. That changed the perception of the consumers drastically.” (Sargentini, 2016). The diamond sector quickly realized that action needed to be undertaken in order to prevent a negatively changed reputation of diamonds (Bieri, 2010). During the Kimberley Process civil society was invited too, to share the findings of the reports (Wright, 2012). As there were multiple NGOs that wrote reports, there were only a few western-based NGOs to represent the civil society, amongst more African NGOs (Kimberley Process, 2016). These were Global Witness, Partnership Africa Canada that were based in the western (consuming) states.

The Kimberley Process was and still is a negotiation between states as the Participants (Wright, 2004). In this sense, the role that civil society plays is very important and remarkable. The civil society coalition was able to negotiate on how the scheme would operate (Feldman, 2003). Pointed out by several of the interviewees, this is very remarkable, as some of the Participants had very different opinions on what the involvement of civil society should be (EC official interview, 2016; Sargentini, 2016). Put differently, some of the producing states found the involvement of civil society odd, as within their own borders they do not allow the voice of civil society to be present (ibid.).

It is because of this perception of these state participants that the role within the negotiations has been limited, though. The civil society coalition has been pushing during the negotiations for a monitoring entity and an administrative body that would

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serve the Kimberley Process (Feldman, 2003). Civil society offered to be this monitoring independent body. As we now know, this plan has not been successful, as the Working Group on Monitoring within the Kimberley Process, a collective of Participants and Observers is operating within this working group (Kimberley Process, 2003). This has been one of the greatest criticisms by the NGOs and the academic world on the Kimberley Process: the absence of an objective monitoring system (Feldman, 2003).

Relating this to the framework, there was the hypothesis that involvement of NGOs would result in a stringent certification. As been mentioned before, it is certain that NGOs moved the consumers to be more critical of the diamond sector and its practices and thus moved the diamond sector towards the acceptance of the creation of the Kimberley Process.

The historical support of the government

The initiators: the African states

As a global voluntary certification scheme, the Kimberley Process came around differently than the other the certification schemes. The whole Process was initiated by the call of the UN on a certification scheme to minimize the percentage of conflict diamonds entering the consuming market (UN Resolution, 56/263). As has been mentioned before, it was Botswana, South Africa and Namibia that commenced the Kimberley Process (Kantz, 2007). These states had their interest in the certification scheme and therefore also invited the diamond sector in the process. The three African states were all producing states and were also greatly depended on the national diamond sector. In the section on the involvement of the NGOs, I already pointed out that there was a fear of the campaigns actually harming the industries. As these three African countries did not face any conflict, they were afraid that this would also harm their diamond industry and thus the economy (Wright, 2004).

The European Union as support

The EU has entered as one participant in the Kimberley Process (EC/2368, 2002). This was due to the fact that the Kimberley Process was regarded as trade measurement, that fall under the mandate of the European Union (EC, 2015). The

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support of the government is essential to the success of a certification scheme, as these institutions could give financial and legal backing for adaptation of the certification scheme (Gulbrandsen, 2009; Auld et al, 2008). However, the European Union can not be seen as a government like it has been seen in the other sectors, as it has a largely supervisory role (EC/2368, 2002). It is for this reason that the experiences of the Belgian Union Authority will be used at some points. The Belgian Union Authority one of the first that was involved within the Kimberley Process (Wright, 2004). This already reveals that there was at least advisory support (EU official interview, 2016; Belgian FOD official, 2016).

Belgium was amongst the first with a legislative framework on diamonds. These legal frameworks focused largely on anti-money laundering, tax avoidance and smuggling (FOD, 2016). After the Second World War, the Belgian government was aiming to attract the diamond sector back to Antwerp, although regulated (FOD official interview, 2016). Diamonds are subject to these practices due to their size and preciousness (FATF, 2013). As Belgium succeeded in attracting the diamond sector back to Antwerp and creating one of the greatest centers globally, they advised the European Union in how to design the certification scheme within the practices of the diamond sector. (FOD official interview, 2016; Wright, 2004). One of the Belgian FOD officials (interview, 2016) pointed out:

“Since there was already a framework in place, we could advise the European Union effectively on the best practices for monitoring the imports and exports of diamonds. For example: there was a discussion on how to include the certificates: within the package or outside. Our department stated that outside of the package would be less fraud sensitive and so the European Union, after conciliation with the other Member States, took over our position in the end ”.

What should be noted in relation to the other certification schemes is that the Kimberley Process was treated like a binding by the states. Hence, there was a great willingness from the some of the producing and consuming states to create a framework. As has been mentioned in the theoretical framework, this would lead to a higher stringency.

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Stringency

Now that I have concentrated on the contextual variables, that have been identified by Fransen and Burgoon (2012) that could influence stringency. It is now of importance to test whether these actually resulted in a higher stringency. The contextual variables were all highly favorable for a high stringency, except for the fact that the diamond sector was unified, this could have led to lower stringency.

The way stringency was measured combined by using three variables: • The degree of the adoption of the standards (Fransen & Burgoon, 2012);

• The specificity of implementation of the standards and the enforcement and its procedures (Fransen & Burgoon, 2012);

• The degree to which stakeholders can review the policy (Fransen & Burgoon, 2012)

These variables will be each thoroughly discussed. However, a summary of the three variables and its sub variables based on the framework proposed by Fransen and Burgoon (2012) can be found below.

Degree of adaption of standards

Comprehensiveness of standard

Narrow

Standard formulation Stringent Specificity of the content Specific Reference to other

codifications

Low, but first initiative

Specificity of the

implementation

Scope of requirement Business to business

Degree of requirements are discretionary High Specificity of implementation policies Low Degree of review of regulations Decision-making and governance within the

High due to tripartite structure

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organization

Monitoring of

performance at factory site

Low

Review and revisions performed

Low

Information dissemination High

Table 2: vizualisation of the results of Kimberley Process on “stringency” – based on framework Fransen and Burgoon (2012)

Degree of the adoption of the standards

As has been addressed in the section on the Kimberley Process, the comprehensiveness of the Core Document is quite low, due to the fact that the definition of conflict diamonds is a narrow one. In my research all the stakeholders of the Process have backed this statement: civil society, the European Commission as well as the diamond sector (Action Aid interview, 2016; European Commission officials interview, 2016; Erik Jens interview, 2016).

On the manner the standards are formulated, in a stringent or a lax manner, I can state that the Core Document of the Kimberley Process has stringent standards in terms of entering the Kimberley Process. However, after entering the Process, the requirements for the Participants are limited, except for the certification requirements and the technical aspects of the Process (Wright, 2004). On the specificity of the content in the Core Document there needs to be a division as well. For the technical requirements, there the document is very specific on which diamonds are included and how the certificate of the diamonds should look like (Haufler, 2009). In this sense, the Kimberley Process is specific and stringent.

Lastly, in the Core Document there are several references to earlier codification, to the statement of the UN and the call to create a certification scheme on conflict diamonds, United Nations General Assembly Resolution 55/56 (2000) (KP Core Document, 2003). In addition to this, there are also references in the Core Document to earlier bans of the producing states, like Angola in 1998 (ibid.). However, these documents only point out the relevance of the Kimberley Process at that certain time, they do not refer to earlier standards in conflict diamonds. This probably has to due with the fact that the Kimberley Process was the first initiative on diamonds and therefore the references to earlier standards are low.

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Specificity of the implementation

The scope of the Kimberley Process is amongst the producers: after the diamonds have been polished or in another way have been refined, the Kimberley Process is not applicable anymore. This is when the System of Warranties is of operative (WDC, 2014). This system supports the whole supply chain of the diamonds in assuring that there is no conflict diamonds that are sold. Hence, the Kimberley Process remains a business-to-business certification scheme, which might result in a lower stringency of the certification scheme.

The requirements of implementation are discretionary and the specificity of the implementation is low. The core document itself does not point out on how the implementation should be executed. In the annexes it only gives recommendations on what could be of use to implement the Kimberley Process regulations. There is specified in the Core Document that the Participants might alter the legal framework in order to be able to complement the certification scheme (Kimberley Process, 2003).

Degree of influence on the regulations

This section will have influence on the analysis of the implementation, most notably on the sustainability part in which I will discuss whether the Kimberley Process has been able to include new findings in order to evolve in a more mature process.

On the decision-making and the governance process, the Kimberley Process, as been mentioned before, is one of the first voluntary certification schemes that was successful in bringing together the industry, the states and civil society (Wright, 2004; Haufler, 2009b). The industry and the civil society have both also have influence on the decision-making that is based on consensus amongst the three parties (ibid.). Hence, it can be stated that the civil society, in essence, has at least some influence in the Kimberley Process. This would lead to a higher stringency according to the framework.

Considering the review and the revision, it has to be pointed out that every Participant as a state needs to be reviewed every three years (Kimberley Process,

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2012). This whole process and the revision of the reviews are the responsibility of the Working Group on Monitoring (Kimberley Process, 2003). Hence, there is a system in place that potentially is able to work on reviewing and monitoring, and sharing best practices.

Lastly for this part of the stringency variable, the information dissemination has to be reviewed. Information dissemination is essential to the Kimberley Process, as discrepancies will become apparent amongst producing and consuming states. Therefore, in the annual review, the Participants need to include the annual import and export, as well as sharing best practices through the annual meetings. Moreover, if fraud is detected, the Kimberley Process should be informed. Consequently, in essence this sub variable is high, as the information dissemination is key to the Kimberley Process.

Conclusions

Looking at the three variables derived from the literature of voluntary certification schemes, I claimed that the Kimberley Process could be a stringent certification scheme. This was based on the involvement of the NGOs and the supportive government.

In essence, the certification scheme is stringent in the sense that it has been the requirements to enter as a Participant and the requirements for trade within the Kimberley Process, looking at the first variable of stringency.

However, looking at the second and the third variables on stringency, one can state that this quite low. This has to do with the fact that the Kimberley Process has not been able to fully guide its Participants in the implementation of the certification scheme (Wright, 2004). These findings will have had influences on the actual implementation of the Kimberley Process, that I will discuss now using a part of the framework of Proctor et al (2011).

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Now that I have concluded that the Kimberley Process through the framework of voluntary certification schemes that the Kimberley Process is in essence could be considered a stringent framework, it is of importance to understand how this has influenced the implementation the Kimberley Process. The variables that I have selected were fidelity and sustainability. I will address each of them in the follow section.

Fidelity

Fidelity described whether the execution of the policy, thus the Process is in line with the document (Proctor et al, 2011). I will largely focus on the Belgian Authority, since the European Commission only serves as a supervisor and does not execute any of the checks on the diamond imports and exports (FOD interview, 2016).

The Process of rough diamonds: the case of the Belgian Union Authority

The import of diamonds happens through one of the six Union Authorities (EC, 2015). The importing party itself can decide to which Union Authority it would like to import (ibid.). However, the importer itself must take care of the costs of transport to the EU, but also within the EU. In the case of Belgium, every package that arrives first has to go through the customs. The customs work through the TARIC (Integrated Tariff of the European Communities) system that has been established by the European Union (EU KP review, 2016). Within this system, all the imports and exports need to be registered. Through this registration, when customs indicate that the packages include rough diamonds, the system will indicate that these packages are subject to extra checks, namely the checking of the presence of a Kimberley Process certificate (FOD official interview, 2016).

After this, in Belgium, all the packages are checked on the content by the diamond bourse in Antwerp (FOD officials interview, 2016). Hence, it is checked whether the certificate corresponds with the diamonds that are inside of the package. However, as has been described in the European Regulation, there is two ways in which the Union Authorities can implement the checks on the content of the packages: every package is checked or packages are randomly checked (EC

The Kimberley Process : lost its shine : an analysis on the weaknesses in its implementation

An analysis on the weaknesses in its implementation

Floor Oudendijk (10262377)

dr. F. Boussaid & dr. L.W. Fransen

24 June 2016

Master thesis Political Sciences: International Relations

ABSTRACT

Table of Contents

Introduction

Literature review

Theoretical framework

Method

Kimberley Process

Pre-implementation analysis