The world’s biggest jeweler announced Tuesday it will drop mined diamonds from its glass cases and sell only lab-generated ones, a pointed move for an industry that relies on scarcity for value and a reflection of consumer demand for sustainability and ethical sourcing.
“It’s the right thing to do,” chief executive Alexander Lacik told the BBC. “We want to become a low-carbon business. I have four children, I’m leaving this earth one day, I hope I can leave it in a better shape than maybe what we’ve kind of created in the last 50 years or so.”
Pandora says its lab-created diamonds have the same chemical and physical characteristics (carbon) as those excavated from mines, and are still graded by cut, color, clarity and carat. They’re produced in hot, pressurized chambers within weeks, which can require a lot of electricity but still can be produced for a third of the mining price, while those pulled from the earth are formed over centuries.
“There is a place in the market for natural and laboratory-grown diamonds, driven by consumer preferences and choices. Man-made colored gems have coexisted with natural gems for more than a century,” according to Stephen Morisseau, a spokesman for the Gemological Institute of America, a nonprofit that developed the international diamond-grading system.
“Natural and laboratory-grown diamonds are both diamonds,” he said in an email to The Post. “While they are not identical, they have essentially the same physical, optical chemical properties.”
The retail diamond industry, which a February report by the Antwerp World Diamond Center and Bain & Co. values at $64 billion, has historically pushed back against synthetic diamonds, viewing them as a threat to the highly profitable scarcity of real ones. But lab-made diamonds are significantly less expensive — as little as one-tenth the cost — than mined diamonds and appeal to a younger customer base given their affordability and because they pose fewer ethical qualms.
“In the US, and especially in China and India, younger consumers say sustainability is part of their decision-making process and could influence whether they buy diamond jewelry,” Bain said in its report.
Lab-grown diamond production reached 6 million to 7 million carats in 2020, and while wholesale prices were stable, retail prices fell, a market mostly concentrated in the United States. That means more price drops could open up lab-grown diamonds to a broader income range of consumers and push them from the luxury category into fashion, the report said.
The Pandora Brilliance collection is carbon-neutral, according to the company. Diamonds are being grown with more than 60 percent renewable energy, which will grow to 100 percent with the global launch.
Pandora also has committed to pull back from using newly mined gold and silver and shift to recycled precious metals by 2025, the same year it expects to achieve carbon neutrality.
Pandora’s global responsible sourcing policy, updated Monday, outlines zero tolerance for forced labor and inhumane treatment, child labor, the use of falsified records to dodge audits, corruption and bribery, serious threat to workers’ health and the environment, and structural failure to adhere to workers’ rights. The company said in its policy that it will not enter new business relationships with suppliers who violate any of these terms but that it reserves the right to assess violations by current suppliers on a case-by-case basis.
Beyond environmental concerns, diamond mining is controversial because of reports of abusive working conditions and child slavery in the mining industry, particularly concentrated in southern Africa. The Kimberley Process, backed by the United Nations, works to address instances of rough diamonds used to finance conflict and war in Sierra Leone, Angola, Ivory Coast and Congo.
But diamond industry players contend lab-made diamonds will eliminate work for miners and upset local economies in artisanal mining communities.
Pandora sells jewelry in 100 countries through 7,000 points of sale and employs 26,000 worldwide. Shares jumped 6 percent on the Nasdaq Copenhagen stock exchange after Tuesday’s announcement, which coupled with better-than-expected first-quarter earnings have analysts like Morningstar equity analyst Jelena Sokolova predicting long-term sustainable growth with its e-commerce focus.
“The company is targeting consumers willing to celebrate personal journeys and accomplishments rather than the crowded bridal market with this offer, which we view as smart,” she said.
Pandora is not the first industry giant to push into the synthetic market. In 2018, De Beers launched an earring and necklace line with lab-made diamonds, with prices starting at $200. The company, which mines diamonds in addition to selling them, has created lab-made products for more than 50 years.
Diamond revenue fell 15 to 33 percent worldwide in 2020, according to the Bain report, as production fell 20 percent because of mining pauses and bricks-and-mortar store closures during the pandemic. But Pandora and other major jewelry brands saw sales bumps from stimulus checks and an acceleration of online sales, and the sector fared much better than other personal luxury categories.
While the pandemic set off waves of wedding cancellations and postponements, many couples spent their money elsewhere, including on bigger diamonds. De Beers saw fourth-quarter sales of engagement rings rise 12 percent from the year before, and other jewelers have experienced similar growth, The Washington Post reported.
But the market’s customer base is shifting, another possible contributor to Pandora’s decision to focus on lab-made diamonds. Millennials now make up the largest portion of buyers, and that generation also has the lowest marriage rates and faces high student debt and a tumultuous economy.
Diamond marketing is already tricky, as the nature of the product emphasizes it will last a lifetime and its special quality is rooted in less-frequent purchases from consumers. To address that amid a generational shift, the industry is having to expand its product marketing to include other life moments beyond marriage that are worth celebrating with diamonds, Bain said in its report.
Pandora’s marketing campaign for the lab-made collection will feature model Ashley Graham and actress Rosario Dawson. Video ads for Pandora Brilliance screened during Pandora’s earnings teleconference Tuesday showed both women comparing their younger selves to “a diamond in the rough.” Both ads end with the line, “A brighter future is in all of our hands, and I believe the best is yet to come.”
