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Rebels in African countries mined diamonds to finance their insurgencies throughout the 1990s, but American jewelry companies didn't understand what the practice had to do with them until late 1998. Tiffany Earring on sale was when Global Witness, a London-based human rights organization, issued a report detailing the trade in "conflict diamonds" and the death and destruction it had caused in Angola."I was stunned," recalled Tiffany & Co. CEO Michael Kowalski. "We had a vague understanding that this was going on in some countries, but we never connected the dots."Kowalski grasped almost immediately that as nongovernmental organizations and the media spread the word, conflict diamonds could quickly become as controversial as fur clothing. He knew he had to react fast, before any consumer campaign got that far. "We're aware of our brand standing," Kowalski said. "If people are going to look to us for leadership, they are also going to hold us responsible as a target. It wasn't hard for us to imagine the NGO community focusing on us."Tiffany subsequently played a major role in establishing a system adhered to by trading countries and the jewelry industry to keep conflict diamonds out of the legitimate diamond supply. The company went further by instituting its own controls and in fact was recognized by Global Witness in April as having the most promising policy against Tiffany Key Ring on sale diamonds among 31 American jewelry retailers surveyed.How much it cost one of the world's best-known jewelers to take an aggressive stance toward conflict diamonds is unclear, but the alternative would almost certainly have been expensive. Even before human rights groups began to stage protests outside Tiffany stores in late 2000, Kowalski secured guarantees from his handful of suppliers that they were, to the best of their knowledge, selling him legitimate diamonds.

"We did some research with our customers and there was very little awareness," he recalled. "What we did find was that when people were educated about it, they did become concerned. In the absence of any sort of action on our part, we knew it had the potential to become catastrophic."In 2000, the World Diamond Council, an industry group, estimated that 4 percent of the world's diamonds came from conflict areas, but estimates are necessarily hazy. A diamond passes though so many hands as it is mined, cut, polished, turned into jewelry, and sold that it is virtually impossible, without scientific analysis, to trace a stone back to its source. Kowalski, who has been CEO since 1983, thought Tiffany was selling very few conflict diamonds in the first place, in large part because the company needed the sort of steady supply that he said only pit mines Tiffany Key on sale provide. Pit mines are expensive operations usually run by government-sanctioned companies, while conflict diamonds tend to come from riverbanks where wildcatters connected to rebel groups prospect.But given the complex nature of the trade and the virtual untraceability of individual diamonds, Kowalski, along with other jewelers, middlemen, and countries that trade in diamonds, knew they had to establish global controls. The result was the Kimberley Process (named after the South African city in which the accord was signed), which went into full effect in July 2003. Countries that export rough diamonds certify that each bag they ship derives from a legitimate source. The other countries in the accord can only import certified diamonds. A related agreement among diamond traders, polishers, and jewelers stipulates that each batch of diamonds must come with an invoice on which is stamped a guarantee of certification.

Human rights activists are not entirely convinced the Kimberley Process is effective, as its strongest controls apply only to rough diamonds. Dealers and jewelers are only supposed to buy cut and polished stones that are guaranteed Kimberley-certified, but no independent monitors check the veracity of those warranties or whether companies ever trade outside the system."We do want to see the industry go beyond self-regulation, which is what it comes down to right now, and have some sort of auditing procedure to make sure the system of warranties is working," said Corinna Gilfillan, a Tiffany Money Clip on sale for Global Witness. Still, Gilfillan applauded in July when the Democratic Republic of the Congo was suspended from membership after Kimberley Process inspectors found that the nation's exports far outstripped the number of diamonds it could have obtained through mining.A spokeswoman for Tiffany said the company believes that the Kimberley Process is still in the early stage, and should be evaluated by all stakeholders. "If it appears that certain changes are necessary, Tiffany & Co. will lend support," she said.Since the Kimberley Process applies to all jewelers equally, no one should have a competitive advantage. Tiffany's major costs, Kowalski said, stem from its efforts to acquire diamonds from Canada, which began before the controversy over conflict diamonds erupted but will help flush them out of the company's supply system.