Blog

Tiffany & Co. seeks sustainability

Tiffany & Co. global strategy

By Jeremy Snyder, Sara Dallaire, Patty Vukanovich, Matt Gottesman, Travis Goulding and Brad Hunter

With the holiday retail season currently upon us, we recently did some research about a well-known jewelry retailer, Tiffany & Co.  When the average consumer hits the streets to look for gifts of jewels or new adornments for themselves, there are a wide variety of choices in the market.  From low to high end, each dealer has its own story, and will offer the shopper a unique experience tailored to what the dealer’s particular pitch entails.  In the case of Tiffany & Co., we received a healthy back-story about the company’s concerns of being a sustainable retailer.  The company’s goals ranged from sourcing gems and precious metals from conflict-free areas, to the use of recycled paper from responsible sources in the paper industry.  Our goal was to go a little deeper and investigate how far Tiffany & Co. was willing to press its concerns, or if the organization’s veil of corporate social responsibility was really a case of public relations spin to appeal to the mass market and make consumers feel good enough to make a purchase.

The investigation began with a trip to Tiffany & Co. to hear the pitch for ourselves, directly from the retailer itself.  We were provided a full spectrum of details about the company’s positions.  Fifth Avenue in New York City was buzzing with shoppers as we made our way up to Tiffany on the corner of 57th Street on Saturday morning.  There was a line of potential customers wrapped around the block patiently waiting for the imposing steel vault-like doors to open so they could make their holiday purchases. Within an hour, the streets would be sprinkled with robin’s egg blue boxes as shoppers made their way home with their special gifts.

Founded in 1837, Tiffany & Co. is an industry leader in jewelry and luxury items. Its main business is fine jewelry (90% of sales), but the company also specializes in timepieces, silverware, china, and stationery.  Many products are packaged in the trademarked Tiffany Blue Box.  The organization sells its goods exclusively through 220 Tiffany & Co. stores and boutiques worldwide.  For the past ten years, Tiffany’s impressive sales growth was due to strategies around building retail stores in high-traffic locations, catalog sales, and broadening its merchandise mix to include items at lower prices than its typical price tag. (see Exhibit 1)  The company also strengthened its product offering by developing niche markets such as luxury handbags and eyewear.  Moreover, Tiffany’s recent success demonstrates its penetration into a broad consumer market, from young to old.  The company has made creative attempts to reach the public by being featured in films including Sweet Home Alabama (2002) and Sleepless in Seattle (1993). Although business was inevitably affected by the financial crisis (as seen in 2008 and 2009 sales), Tiffany & Co. has performed well amidst the unfavorable economic environment.

In 2000, Tiffany established the Tiffany & Co. Foundation, which “makes grants to nonprofit organizations dedicated to design and the decorative arts, environmental and cultural preservation, coral conservation and responsible mining.”  In addition, Tiffany sources the majority of its gold and silver from a mine in the U.S. that “meets high standards of social and environmental responsibility,” which explains the higher premium on merchandise.

The company has also been on the forefront of establishing and joining organizations such as No Dirty Gold, Oxfam, Earthworks and the Responsible Jewelry Council. Despite the PR efforts of the company to tell a compelling story about its socially responsible practices, the jewelry industry is a complicated arena for such efforts.

Tiffany & Co. has a strong focus on guaranteeing sustainability: “Our goal is ‘sustainable style’ enduring designs that embody our unique aesthetic while upholding our commitment to protect the natural world and to responsibly use the resources it provides. All of our stakeholders and most importantly, our customers, expect and deserve nothing less.” One problem with setting this standard in an industry with such a complicated supply chain is the company’s inability to offer a guarantee that the customer will receive a humanely sourced diamond.  Tiffany is not the only player using mines and buying diamonds.  There are many other players in the process that can obscure a diamond’s source.  These players include legitimate but corrupt governments, suppliers, exporters, and industry organizations.  The most significant organization is the Kimberley Process Certification Scheme (KPCS), which acts as the “international watchdog” of the diamond trade.  KPCS states that there are 74 government organizations assisting them in this process, but many have pulled out. Tiffany sources primarily from Africa, Canada, and Russia, but currently the biggest conflict in diamonds comes from Zimbabwe, where a “60,000-hectare diamond field is located in the unstable Marange region.” The diamond industry deems the field as the “biggest find of alluvial diamonds in the history of mankind.”  However, the country is “mired in human rights violations - Governmental military groups have overrun the region and nationalized the mine, killing mass miners, farmers and other residents who the Mugabe government feel are a ‘threat’ to their business.”  Recent news came that the monitor appointed to Zimbabwe by KPCS went against the organization’s past sanction to suspend sales from the mine by unilaterally certifying Chiadwa diamonds for sale out of the Marange region.

While Tiffany only purchases its diamonds from KPCS member countries, it must pressure the industry to expand the KPCS mandate to cover a broader range of human rights violations. Currently, the KPCS only regulates rough diamonds used by rebel movements to finance wars against legitimate governments. Corrupt governments do not fall under the regulations, and are therefore not monitored.

There must also be greater oversight of downstream processing of raw diamonds in order to secure integrity of supply chain from mine to retail display. The rough diamonds are often mined in one country, cut in another, and polished in yet another before reaching their country of sale. While the KPCS requires documentation to travel with the diamonds throughout their journey to the retailer, these papers are easily forged, allowing conflict diamonds to be smuggled into neighboring countries that are members of the KPCS. The diamonds are then mixed in with the “legitimate” diamonds and sold as a batch with proper documentation. In 2006, conflict diamonds were smuggled out of Cote d’Ivoire into Ghana, a KPCS member country. It should be noted that Tiffany acknowledges the imperfection of the process, and is striving to limit the amount of conflict diamonds on the market.  It needs to keep pressure on industry actors to improve these issues. For example, even Tiffany requires no more than a written promise from suppliers that their diamonds are legitimate.

Another flaw with the Tiffany mission is the contrast between the company’s claim to be environmentally responsible, as they have an abundance of boxes, bags, tissue paper and other materials produced in China.  There is increased waste from the production of these materials in China, which has lower environmental standards.  There is also an added layer of waste associated with transporting the materials to the U.S. Moreover, Tiffany believes in traditional marketing channels of utilizing high gloss catalogues, which are sent out 26 times per year or roughly a little less than bi-weekly. Each catalog is 48 pages and the distribution list is roughly 2.5 million people, equating to 3.12 billion pages per year. Tiffany has not published the total weight of paper used annually or the cost amount for paper production in any sources that we researched or answered when asked.  This lack of public information is a strategic move by the company to conceal evidence that would contradict its sustainability promise.  As the article “Strategy and Society” explains, most CSR statements are cosmetic and used as PR campaigns that highlight what the company does well but often what they leave out of the reports is equally important.

While Tiffany has limited control over the source of its diamonds, it has 100% control over its packaging and marketing waste.  Tiffany’s sustainability brochure, used to convey the company’s message to the public regarding the use of recycled paper, is technical and difficult to understand. Tiffany must present information in a way that does not require the reader to be directly engaged in the environmental movement to understand what the practices mean.  The company highlights that 30% of paper used in its catalogs, is post-consumer waste content.  However, Tiffany is, in a way, frozen in a marketing time capsule.  It continues to be heavily committed to a traditional print marketing platform, namely the bi-weekly catalog mailings.   Catalog shoppers are still abundant enough to justify use of catalogs, and are an important segment.  However, Tiffany is essentially issuing the same catalog with the same products rearranged to different pages.  This gives an indication that the organization is not serious about a commitment to reducing waste.

The company needs to get more creative with its marketing, both in terms of its direct mail and with the product development.  Bring in well-known artists to design new pieces, or partner with the artists to use their artwork as inspiration pieces for a line of jewelry.  Imagine a Maya Angalou line of jewelry, with a smaller, directed catalog with a few pages of examples, released around the Mother’s Day buying season, and directing recipients to the website to view the full line-up.  Reduce the main catalog to a quarterly tool and make it seem more like a holiday publication – something buyers would look forward to receiving in the mail.  This would capture the strong sense of tradition that Tiffany has cultivated in its brand.

The investigation leads consumers to seriously reconsider what they are buying when they shop with Tiffany and Co.  Moreover, it is important to note that most, if not all, of this situation may extend throughout the industry.  In today’s world, we face a day-to-day interaction with how we will augment the efforts to make a sustainable world.  To make each aspect of our lives, “more green”.  While we are told that our products, our consumer goods, are coming from a sustainable source, the consumer has to look deeper. Consider the strategic position of the company providing the service and goods.

How important are these issues to the company and how far is it willing to go to make the final sale?  In the case of Tiffany and Co., the investigation shows that while the company is truly making an effort in many aspects of its execution, much of the philosophy is rooted in PR.  The company’s concern extends just far enough to convince consumers that they are justified in purchasing their products, but, at the end of the day, Tiffany wants profits.  Companies around the world, in every industry, are required to make choices, with far reaching consequences, and ethical decisions involving their strategic position.  From Nike’s under-age labor to Tiffany buying stones from conflict sources and overuse of paper goods, the consumer receives only part of the story.  Our hope is that we can shed a light, in a dimly lit environment, that consumers will hold corporations to a higher standard, and that we will continue to improve our planet, our goods, and the human position in an ever-evolving market.

Sources:
- http://www.kimberleyprocess.com
- http://www.amnestyusa.org/document.php?lang=e&id=ENGPOL300572006
- http://www.tiffany.com/Catalogues/Default.aspx?isMenu=1&
- http://www.tiffany.com/sustainability/default.aspx
-Tiffany & Co. Public Relations & Marketing department
- www.Hoovers.com
-Tiffany & Co. Annual Reports, 2001 - 2009

Exhibit 1

Source: Tiffany & Co. Annual Reports (2001-2009)

Annual Revenue

% increase/

Year

(in thousands)

decrease

2009

$2,709,704

-5%

2008

$2,848,859

-3%

2007

$2,938,771

11%

2006

$2,648,321

11%

2005

$2,395,153

9%

2004

$2,204,831

10%

2003

$2,000,045

17%

2002

$1,706,602

6%

2001

$1,606,535

-4%

2000

$1,668,056