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Saturday, June 26, 2010

Tiffany’s Stellar Sustainability Record

There is probably no company in the jewelry industry more aggressive on sustainability issues than Tiffany. The luxury jeweler has come out against the harvesting of pink and red coral, a proposed mine in Bristol Bay, Alaska, and the exploitation of workers in the jewelry supply chain. Not to mention that the company has had a sustainable bent long before it was cool. Yet, it does little to promote or market its leadership role in these and many other issues that have to do with the betterment of the planet and the people on it. Michael Kowalski, Tiffany & Co. and CEO, told about 200 luxury industry executives why.

Caption: Michael Kowalski (second from right) and Christopher Cowdray field questions from Nancy Novogrod. Not seen is architect Adam D. Tihany.

“I think what we always assume as part of any luxury brand promise, certainly part of the Tiffany brand promise, even if unarticulated, is the assumption that nothing terrible happened in the creation of that product,” Kowalski said during a panel discussion at the American Express Publishing Luxury Summit held in April at the Mandarin Oriental, Las Vegas. “Implicitly, I think we all operate with robust margins here and I think the consumer understands that as part of the promise, a luxury brand attends to those issues on behalf of the consumer. We didn’t wait to be told that by our customers, we have simply taken care of it and if someone asks we’ll speak about it but in general I think it doesn’t need to be articulated.”

Kowalski participated in a panel titled, “The Power of Being (and Doing) Good,” where he was flanked by Christopher Cowdray, CEO of the Dorchester Collection, a luxury hotel company, and Adam D. Tihany, principal and founder of Tihany Design, an architecture firm that specializes in luxury hotels and restaurants, including the Mandarin Oriental Hotel, Las Vegas. Both persons also have been recognized for taking a leadership roles on sustainable issues. Nancy Novogrod, editor in chief of Travel + Leisure, moderated the panel.

Kowalski spoke about Tiffany’s effort to pursue its goal of producing a sustainable product throughout the supply chain and the pains he personally takes to deflect criticism that the company is pursuing his personal agenda.

“For years we would have declined to talk about the subject we are talking about today because I probably would have categorize it as a subtle form of brainwashing,” he said. “I think that one of the fundamental issues we have always had at Tiffany is that we like to think that we create objects that last, beauty that lasts.  … The reality is that mining needn’t be, but often is a very difficult business in terms of social issues and environmental issues.”

Novogrod asked if Tiffany ever considered producing fine jewelry with unusual materials that were created in sustainable ways.

“Rather than change our business model in terms of materials, we changed our business model (in order) to have as much control as possible over the supply change as we can,” he said.  “We said the only way to ensure responsibly sourced materials is to, in essence, do it yourself. We integrated downward. We don’t mine. We don’t cut anything from the ground, yet. But we’ve gone right to the mine heads so we could say to the consumer, we’ve seen the mine this particular diamond comes from and we’ve seen that it is done in an appropriate way.”

Some of what Tiffany does is ensure that mines operate in a way that allows its workers to earn fair pay. The company set up its own diamond and cutting facilities in Botswana, South Africa and Namibia. Ten years ago, before any standards existed, the company fought for third-party certification of mines. According to Kowalski, that’s the easy part. What has become more difficult is to spread its philosophy of sustainability throughout the industry.

“To make sure our own industry isn’t part of the degradation of the planet has been a huge challenge for us,” he said. “So we spend as much time doing the right thing in terms of our own business and spend as much time being advocates.”

He added, “One of our big objectives is to create a social infrastructure so that those who mine and source products have a more equitable share of the profits of the entire supply chain.”

When asked whether any other company in the jewelry industry has taken this kind of leadership role, Kowalski answered, Wal-Mart. “In the jewelry space you have to take your hat off to Wal-Mart for what they have accomplished and because they seem to be quite serious, for example, in identifying the mine.”

This brought a quick response from Tihany the architect, who noted that the vast majority of goods it sells are manufactured in China. “If 50 percent of their things came from the United States, they’ll be doing 10 times more commitment than they’re doing right now.”

“You’re absolutely right,” Kowalski responded, “but short of abandoning their basic business model I wouldn’t ask them. I hope no one would ask us to do that.”

An audience member asked for some anecdotes from customers that compelled them to use their product or service because of their commitment to sustainability. Kowalski produced a letter that he said he just received from his staff before the conference. It was from a person who supported Tiffany’s stance against establishing a mine for the excavation of copper, gold and molybdenum (often used in high-strength steel alloys) in Bristol Bay, Alaska, because of the possible detriment to the salmon fishing industry and the possible environmental impact.

He read the letter aloud: “Who would have thought that advocacy or a heritage of great beauty and a vital fishery, a heritage that rightly belongs to our three sons and their children, would come out of a blue box. But it makes perfect sense. I’ll always shop at Tiffany. “

“We hear that over and over,” Kowalski said. “But having said that I have no idea what that means quantitatively. I wouldn’t go to the next step and say I can build a business case about it. There’s plenty of anecdotal information. What it ends up meaning in terms of the bottom line, I’d like to think a lot, but that would be dishonest.”

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