The international landscape for lab-grown diamonds is experiencing turbulence, placing the industry at a critical juncture. How can China’s lab-grown diamond industry elevate its development strategy to effectively penetrate and compete in the global market? To explore this issue, we interviewed Mr. Wang Zhidong, Director General of the China Division of the AIDI International Intelligent Diamond Association.
Mr. Wang emphasized that China's approach to expanding the lab-grown diamond market is a multi-faceted strategy. His primary market recommendation focuses on ESG (Environmental, Social, and Governance) certification, a service AIDI has pioneered for the lab-grown diamond industry.
ESG's Impact on Business Value
Before delving into the value ESG can bring to enterprises, it’s pertinent to reflect on the recent discussions from the National People's Congress in mid to late March 2024. At this congress, "new quality productivity" emerged as a prominent term. President Xi Jinping highlighted that "new quality productivity is inherently green productivity. We must accelerate the green transformation of our development methods to achieve carbon peaking and carbon neutrality." Advanced productive forces that align with new development concepts must integrate social responsibility into their production, value, and innovation systems to inject strong momentum and support for high-quality development.
Globally, in February 2022, the European Parliament's Environment Committee voted to adopt the Carbon Border Adjustment Mechanism (CBAM) agreement, also known as the "carbon tariff." This EU legislation has garnered significant attention domestically. Industry experts generally believe that while the immediate impact is relatively small, the symbolic significance is substantial. CBAM exemplifies the transformative pressure ESG trends exert along the industry chain. Countries and enterprises that dominate the industry chain are leveraging their influence to push their partners to adopt low-carbon and green ESG principles. Companies within the chain must respond to avoid falling behind and missing market opportunities. Similarly, at Huawei’s Supplier Carbon Reduction Conference on May 24, 2022, Huawei’s Chief Supply Officer announced that green and environmental requirements had been integrated into their procurement process. Clearly, Huawei has also joined the carbon reduction movement.
ESG in the Lab-Grown Diamond Supply Chain
The lab-grown diamond industry’s supply chain, a crucial link in economic development, has attracted significant attention both domestically and internationally. Policy and mechanism settings are now imposing stricter controls on supply chain-related elements, aiming to deepen the awareness of sustainable development among key entities and enhance their ESG performance, track carbon emissions, and reduction benefits. Conversely, neglecting ESG management in the supply chain may result in missed policy support, hindering future development and international cooperation.
According to a sustainability report by Green Print published in March 2021, 75% of millennials in the United States are willing to pay more for environmentally sustainable products, and 77% of the overall sample are concerned about the environmental impact of their purchases. This signals that to attract the younger generation of customers, companies must develop robust ESG strategies or plans to enter new markets competitively and expand their influence in existing markets. Specific market behaviors, such as the increasing ESG certification requirements at jewelry exhibitions worldwide, reflect this trend. The recent decision by GATA to exclude lab-grown diamonds from its exhibitions underscores this, especially within European and American markets.
Seizing Opportunities Amid Transformation
Companies with innovative technologies will have opportunities to capture market share by participating in AIDI’s green transformation of the lab-grown diamond industry, securing a place in the future industrial landscape. Additionally, companies that improve labor conditions, promote diversity, and give back to their communities will enhance their brand image and public relations, further opening up global market opportunities for lab-grown diamonds.