The Importance of Circular Business Models

RAPAPORT... Consumers require authenticity and transparency these days, especially when buying something as meaningful and precious as natural diamonds. However, the sector remains tarnished by a reputation for dubious ethical practices, despite the fact that it is regulated.The conflict between this dirty industry image and the beautiful, shiny stones it produces makes it hard to alter perceptions - particularly among younger consumer segments. Yet transparency continues to be an essential component in unlocking value, strengthening market position, and improving rapid and precise business decision-making. This is especially relevant during disruptive times such as those we are currently facing with the Covid-19 pandemic.One meaningful way of rehabilitating the industry's reputation is by implementing circularity - namely, sustainability-focused, circular business models that create value while minimizing ecological and societal impacts. This approach requires diamond miners and manufacturers to measure the efficiency of their materials and processes in order to reduce linear "flows" of waste and maximize restorative, circular ones.Waste not, want notIn natural ecosystems, where diamonds come from, waste and pollution don't exist. Waste, as we know it today, is a by-product of industrialization, the traces of which we must inevitably deal with. It also comes in many forms.According to a 2019 report commissioned by the Diamond Producers Association (DPA) and published by Trucost ESG Analysis, the operations of companies that made up the DPA in 2016 emitted an average of 160 kilograms of carbon dioxide (CO2) per 1 carat of polished diamonds produced that year.This figure - comparable to the CO2 emissions generated by a 390-mile drive in an average car - is more than the amount discharged in the production of many consumer goods. For instance, it is greater than the emissions associated with manufacturing a 13-inch, 128-gigabyte Apple MacBook Air. Moreover, the evaluation doesn't include emissions from all the indirect processes connected with producing a single carat of polished diamond, such as exploration, mine closure, diamond cutting and polishing, retail, and the post-sale life cycle. Shifting to renewable energy infrastructure can modify this trend, securing circular, natural-energy resources for the industry while minimizing its dependency on oil. For example, diamond-production processes that rely on water can benefit from a closed-loop system where the resource is reused, thereby protecting reserves in areas where supplies are scarce. Such systems can be implemented in both mining operations and the factories where diamonds are processed. Similar approaches are necessary to tackle the industrial waste that diamond production generates - including construction materials and exhausted machinery - as well as emissions to air, land and water sources caused by on-site operations like transportation and the incineration of waste.Weighty mattersBy far the biggest source of waste in diamond-mining operations is rock. The Trucost report found that DPA member diamond-mining operations generated an average of 4,350 kilograms of waste rock residues per 1 carat of polished diamonds in 2016. This constituted more than 99% of all waste by weight.In order to create a circular value chain, rock residues need to be claimed back during a mine's rehabilitation efforts to avoid even greater waste traces. This is essential to reducing the negative environmental impacts on both the site and its surroundings. Local land-protection schemes are important for wildlife and people. Regenerating and recovering natural ecosystems after mines close are core circular actions in restoring biodiversity.Natural-diamond companies need to think about how the fortune derived from diamonds contributes to all stakeholders, including local communities and natural ecosystems. What companies do with the proceeds reflects on who they truly are.Additionally, the industry as a whole must think about its evolution, particularly the point at which diamonds are too difficult and expensive to mine. It is also important that the sector reflect on how it can keep on creating value and benefits for the millions of people worldwide who depend on it.Circularity is based on better design and long-term planning. It entails developing a regenerative system where the waste from processes or materials can be used rather than discarded. However, circular-economy principles can also be developed around reselling and repolishing diamonds. This would expand the diamond product range, allowing for interoperability and reuse.Circular business models such as these generate consumer loyalty and high traction. At the same time, they create new profit channels, helping ensure the continuity of the industry while protecting the resources on which it relies.This article was first published in the February 2021 issue of Rapaport Magazine.Image: Danielle Keller Aviram. (Gilad Bar-Shalev)