Midas Touch

Will the gold industry’s sustainability efforts pay off?

When gold turns green, it isn’t usually a good thing. But jewelry makers, experiencing an increase in production costs and feeling a squeeze on gold supply, are taking a keen interest in greening their supply chains. Additional factors—including stricter laws around toxic waste from mines and mounting pressure from consumers—are leading jewelry companies, representing 55 percent of worldwide gold demand in 2008, to adopt more sustainable business practices.

New standards being established at gold mines by jewelers today could eventually trickle down to other industries such as electronics—which uses the metal as a conductor and ranks as the second-biggest consumer of gold.

The shift comes at a time when, largely due to the decrease in value of the U.S. dollar, the price of gold continues to rise. (It skyrocketed to $1,100 per ounce in 2009, a 28-year high.) But post-recession, when the price of gold drops again, companies that haven’t cleaned up their act could face serious losses.

Throughout history, gold has been used as a symbol of power, sacredness and accomplishment—a status symbol used in wedding rings, gold medal awards and ornate decorations. But it’s no secret that the modern metal mining industry is both costly and dirty. The U.S. Environmental Protection Agency’s (EPA) Toxic Release Inventory ranked the industry as the nation’s top chemical polluter in 2008. Cyanide solutions, which are widely used to dissolve and extract gold, are a major environmental concern of the gold industry specifically, as the chemical can be extremely toxic to humans and animals if it leaks into soil and water. Waste is another issue: 99 tons of waste are generated per ton of copper, with even higher ratios in gold mining, according to EPA.

When a mine ceases operation, that waste is both tricky and expensive to clean up. EPA estimates that total cleanup costs for abandoned mines across the nation stand at $50 billion, with other estimates putting the total as high as $72 billion—a burden often shouldered by taxpayers if mining companies go bankrupt to avoid paying.

Raising The Gold Bar
In July 2008, Wal-Mart [NYSE: WMT]—the world’s largest jewelry retailer with an estimated $2.9 billion in jewelry sales that year—became the first major jeweler to set environmental standards for the mining industry when it launched its sustainable “Love, Earth” collection. Still available in stores nationwide, the jewelry line allows consumers to trace each piece of gold and silver jewelry from its source to Wal-Mart’s shelves.

A member of the Initiative for Responsible Mining Assurance, Wal-Mart has set a long-term goal to source all its gold, silver and diamonds from mines and manufacturers that conform to responsible standards.