FAIR TRADE JEWELLERY CO.: ESTABLISHING AN ETHICAL GLOBAL
VALUE CHAIN CASE STUDY SOLUTION
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SYNOPSIS
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In August 2019, Fair Trade Jewellery Co. (FTJCo), a mid-size Toronto-based jewellery retailer, was
wondering how to ensure that its customers received responsibly sourced gold and diamond jewellery. The
company already devoted a considerable amount of time, energy, and expense to developing a responsible
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supply chain. Its activities toward that goal included various initiatives beyond jewellery retail, such as
providing inventory financing for artisanal miners in the Democratic of Congo (DRC). Having discovered
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that a key United States (US) partner along the supply chain has not been following a clear chain-of-custody
system in its refinery, FTJCo is now unsure how to proceed. Responsibly sourced gold is potentially being
contaminated by other gold at the refinery, which has led FTJCo to consider opening its own local small-
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scale refinery. However, that initiative could mean considerable strategic risk and financial burden for the
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The Case Solution Starts From page 5
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ASSIGNMENT QUESTIONS
1. Describe the gold supply chain, comparing that of the large mining firms with that of artisanal miners.
2. Describe FTJCo’s starting position and the various steps the company went through to develop a
responsibly sourced gold supply chain.
3. What do you see as the key problem in this case? What underlying problems are there?
The Case Solution Starts From page 5
,4. Is the refinery financially viable? What are FTJCo’s estimated revenues, net earnings, gross margin,
and net income margin? How much money can the company save in gold costs by developing its own
small-scale refinery rather than using the US facility?
5. If you were in FTJCo’s position, what would you do and why?
ANALYSIS
1. Describe the gold supply chain, comparing that of the large mining firms with that of artisanal
miners.
Students must understand the basics of how the gold supply chain works and who the various actors
involved in the process are. Perhaps most importantly, students should note that refineries purchase gold
from a variety of sources, including large-scale mines and artisanal and small-scale mines. They then sell
this gold to jewellers such as FTJCo, other manufacturers,1 and central banks. Students should understand
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that refineries are a middle “choke point” in the supply chain, and that they also serve as a site of risk.
Refineries often fail to investigate the provenance of gold. They rely primarily on assurance documents,
pl
which can be fabricated or forged. Therefore, what is known as “blood” gold can be supplied by armed
non-state actors in some developing regions (such as the DRC) to enter the supply chain for laundering the
m
illicit gold.2 This process can also potentially occur in the US refinery that provides materials to FTJCo.
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2. Describe FTJCo’s starting position and the various steps the company went through to develop
a responsibly sourced gold supply chain.
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tio
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So
The Case Solution Starts From page 5
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EXHIBIT TN-2: ADVANTAGES AND DISADVANTAGES OF THREE OPTIONS
Option 1: Option 2: Option 3:
Develop refinery Do not develop refinery Use Consensas software
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Degree of positive change Disadvantage: Neutral: Advantage:
Arguably, this will not lead to This will neither increase nor Implementing Consensas
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system-wide transformation decrease FTJCo’s degree of in refineries may lead to
or engagement. change across the supply system-wide change.
chain.
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Empowerment of ASM Neutral: Neutral: Neutral:
miners This will have little effect on This will have little effect on This will have little effect
the miners themselves. the miners themselves. on the miners themselves.
So
Financial outcome
.
The Case Solution Starts From page 5
VALUE CHAIN CASE STUDY SOLUTION
e
pl
SYNOPSIS
m
Sa
In August 2019, Fair Trade Jewellery Co. (FTJCo), a mid-size Toronto-based jewellery retailer, was
wondering how to ensure that its customers received responsibly sourced gold and diamond jewellery. The
company already devoted a considerable amount of time, energy, and expense to developing a responsible
n
supply chain. Its activities toward that goal included various initiatives beyond jewellery retail, such as
providing inventory financing for artisanal miners in the Democratic of Congo (DRC). Having discovered
tio
that a key United States (US) partner along the supply chain has not been following a clear chain-of-custody
system in its refinery, FTJCo is now unsure how to proceed. Responsibly sourced gold is potentially being
contaminated by other gold at the refinery, which has led FTJCo to consider opening its own local small-
lu
scale refinery. However, that initiative could mean considerable strategic risk and financial burden for the
So
The Case Solution Starts From page 5
, e
pl
m
Sa
n
tio
lu
So
ASSIGNMENT QUESTIONS
1. Describe the gold supply chain, comparing that of the large mining firms with that of artisanal miners.
2. Describe FTJCo’s starting position and the various steps the company went through to develop a
responsibly sourced gold supply chain.
3. What do you see as the key problem in this case? What underlying problems are there?
The Case Solution Starts From page 5
,4. Is the refinery financially viable? What are FTJCo’s estimated revenues, net earnings, gross margin,
and net income margin? How much money can the company save in gold costs by developing its own
small-scale refinery rather than using the US facility?
5. If you were in FTJCo’s position, what would you do and why?
ANALYSIS
1. Describe the gold supply chain, comparing that of the large mining firms with that of artisanal
miners.
Students must understand the basics of how the gold supply chain works and who the various actors
involved in the process are. Perhaps most importantly, students should note that refineries purchase gold
from a variety of sources, including large-scale mines and artisanal and small-scale mines. They then sell
this gold to jewellers such as FTJCo, other manufacturers,1 and central banks. Students should understand
e
that refineries are a middle “choke point” in the supply chain, and that they also serve as a site of risk.
Refineries often fail to investigate the provenance of gold. They rely primarily on assurance documents,
pl
which can be fabricated or forged. Therefore, what is known as “blood” gold can be supplied by armed
non-state actors in some developing regions (such as the DRC) to enter the supply chain for laundering the
m
illicit gold.2 This process can also potentially occur in the US refinery that provides materials to FTJCo.
Sa
2. Describe FTJCo’s starting position and the various steps the company went through to develop
a responsibly sourced gold supply chain.
n
tio
lu
So
The Case Solution Starts From page 5
, e
pl
m
Sa
EXHIBIT TN-2: ADVANTAGES AND DISADVANTAGES OF THREE OPTIONS
Option 1: Option 2: Option 3:
Develop refinery Do not develop refinery Use Consensas software
n
Degree of positive change Disadvantage: Neutral: Advantage:
Arguably, this will not lead to This will neither increase nor Implementing Consensas
tio
system-wide transformation decrease FTJCo’s degree of in refineries may lead to
or engagement. change across the supply system-wide change.
chain.
lu
Empowerment of ASM Neutral: Neutral: Neutral:
miners This will have little effect on This will have little effect on This will have little effect
the miners themselves. the miners themselves. on the miners themselves.
So
Financial outcome
.
The Case Solution Starts From page 5
