The importance of Fairtrade Gold and other green concepts
Sustainably produced precious metals to meet the demands of a modern world
Sustainability is gradually affecting all areas of life, and has become important in the precious metals industry over recent years. Here, the predominant focus is on the social and ecological consequences of primary gold extraction and processing. A direct comparison between professional gold mining by large companies and the impact of artisanal mining has highlighted different effects on the ecosystem. Green mining of “Fairtrade Gold”, observing high environmental and social standards, is much in vogue. Furthermore, precious metal recycling is a prime example of environment-friendly practice closely associated with fair working conditions.
© qimono - pixabay.com
Green or ethical gold is well-established in our society and has gained a firm place among buyers of bullion gold and high-quality jewellery. In the modern world, engaged and well-informed consumers attach great importance to knowing the source and origins of any gold in which they may wish to invest money, and under what conditions it was processed to create the respective end product. In a sense, green gold thus becomes a quality seal of approval that can increase the value of a product, provided there is sufficient demand. Transparency is the key concept here, and the end customer is most likely to find such transparency by dealing through specialist retailers.
To ensure open and honest trading conditions when sourcing gold bars and gold coins, specialist precious metal retailers rely upon long-established monitoring bodies such as the London Bullion Market Association (LBMA). This organisation sets the standards for the global precious metal wholesale trade, and these clearly defined principles ensure that integrity and transparency are maintained throughout the precious metal industry. The certified gold produced by LBMA-registered manufacturers enjoys a high reputation among dealers and end customers. Likewise, the World Gold Council plays a similarly important role in the precious metal industry. This international lobbying organisation for the gold mining industry advocates responsible and sustainable gold mining. In view of the existence of these two important bodies, it’s a fair question whether there is any real need for further independent eco-concepts, and if so, what particular benefits they may bring.
What is Fairtrade Gold?
The “Fairtrade” organisation is committed to fair and controlled trading conditions worldwide which enable producers to receive defined minimum prices for their products. This free trade movement focuses in particular on goods exported from developing countries to industrialised countries. Fair trade includes agricultural products as well as handicraft and industrial products, and Fairtrade Gold occupies an important niche area within the industrial products category.
Fairtrade Gold stands for a sustainable future for small-scale, artisanal gold mining. Companies can qualify for this coveted seal provided they adhere to the organisation’s strict requirements regarding environmental protection criteria, including the health and safety of miners. This initiative is intended to prevent the use of harmful chemicals such as mercury, which can harm both people and the environment. In addition to this, illegal child labour is strictly prohibited in Fairtrade-certified gold mines – a practice which otherwise occurs frequently in small-scale mining operations. And because gold mining is often informal and illegal, acts of violence, smuggling and theft of land are not at all uncommon. That’s why the organisation is committed to legalising and formalising mining operations, and creating better and safer working conditions via its “Fairtrade Gold Standard”.
Direct, on-site monitoring to ensure compliance with economic, ecological and social standards is overseen by FLOCERT, an independent certification company which acts as an autonomous subsidiary of Fairtrade International. FLOCERT handles the certification of manufacturers and traders in around 115 countries.
Other eco-friendly concepts for sustainably produced precious metals
As well as Fairtrade Gold, there are other eco-gold concepts too. These include the label “Auropelli Responsible Gold”, which was devised as the result of a collaboration between two refineries: Switzerland’s Valcambi and ESG from Germany. Gold bars in weight units from 1 to 100 grams are produced under this branding. However, the gold used does not come from developing countries, but originates from traditional gold-producing areas of the USA.
In addition to this initiative, Valcambi’s own “Green Gold” brand is also committed to gold products from sustainable mining. Here, the entire manufacturing process is detached from any other product lines which are not included within this special certification. Valcambi calls this a Green Gold Supply Chain which processes gold bars in weight categories from 1 to 100 grams and 1 kilogram for the end customer market.
Colombia’s “Fairmined certification” is also worth a mention. This is the non-profit organisation Alliance for Responsible Mining (ARM) which has committed to guaranteeing that certified manufacturers receive high social premiums of up to 6,000 US dollars per kilogram of green gold. Fairmined Gold bars and coins are sold in Europe by the German company Fairever.
Fairtrade Gold: A real alternative – or just greenwashing?
Many private buyers of gold products will question whether purchasing Fairtrade gold or other eco-gold products actually delivers tangible benefits, or whether such initiatives are simply clever marketing ploys adopted by the suppliers. However, it is a fact that the environment suffers extremely negative effects from the toxic chemicals often used in gold mining processes. In addition to this, illegal deforestation, which includes the clearing of rainforests urgently needed for our global ecosystem, is another serious aspect. Elsewhere, lack of genuine social support systems, starvation wages, child labour and corruption all serve to bring the international gold trade into disrepute.
The organisations mentioned above are committed to preventing such conditions. Anyone who buys ethical gold with an appropriate seal can therefore be sure they are not buying products which are produced in an unregulated, environmentally and socially destructive manner. In addition, the purchase of these products helps to support the commitment of such small businesses. However, interested investors should also note that eco-certified bars and coins are usually traded at significantly higher premiums. It is also important to understand that artisanal mining accounts for just ten percent of the total global gold production. The rest is generated by large mines and corporations whose processing output conforms to international standards (see the next section on LBMA).
In the opinion of many experts, provided green gold remains a transparent process for the extraction and processing of precious metals and the set standards are adhered to, any question of greenwashing can be ruled out. It is important too that gold processing is not subsequently “whitewashed” by donating money to other ecological projects, because any “green” image purchased in this way, without any corporate commitment to preserving the environment, has nothing to do with sustainability. As already mentioned, transparency is the key word here.
From a private investor perspective, there is generally a problem keeping track of all the various seals and certifications in order to organise them according to one’s particular concerns. So this is where it can be helpful to discuss matters with a specialist precious metals specialist dealer who can then provide targeted advice.
LBMA and the Good Delivery Standard
The vast majority of global gold demand (around 3,600 tonnes per annum) is extracted via larger gold mines. But what applies to smaller producers should to some extent also apply to these mining companies. The environmental impact can be seen when you consider that around one tonne of rock has to be processed in some way to deliver just two to ten grams of gold.
© Gyathursan - pixabay.com
Here, organisations such as the London Bullion Market Association, generally abbreviated to LBMA, are committed to compliance with standards designed to regulate every phase of the extraction and processing of precious metals. This association coordinates international gold trading via the largest non-stock-exchange trading venue, the London Bullion Market. This exchange only allows the trading of gold bars from manufacturers who have previously been certified by the LBMA via a complex long-term process.
The LBMA has been setting valid standards for its so-called Good Delivery bars since 1919. These specifications include a series of rules describing the physical properties of precious metal bars. Good Delivery gold bars weigh 400 ounces or 12.5 kilograms, with only minor deviations permitted such as those which can occur during the casting process. Good Delivery bars may only be manufactured under license from the LBMA. The product dimensions are also specified, as is its fineness, which must be at least 995/1000. These heavy standard bars are intended for wholesale trading and for central banks who use them to secure capital. LBMA-certified manufacturers also produce gold bars and gold coins in smaller weight units for private buyers.
Beyond size, weight and fineness, are yet more criteria which must receive equally important attention from those seeking LBMA approval. Manufacturers who wish to acquire one of the coveted trading certificates must have been on the market for at least five years, and must also have secured at least three recommendations from existing LBMA members. Furthermore, their annual production volume must be at least ten tons, and they must possess net assets of at least 15 million GBP – around 17.3 million Swiss francs. In addition, any company seeking approval must have compliance and risk management guidelines in place and meet the LBMA’s KYC (know your customer) principles. Applicants must also commit to adhering to the basic principles of sustainable precious metal extraction and processing.
The LBMA's Responsible Sourcing Program
The LBMA’s Responsible Sourcing Program is a code of conduct covering responsible manufacturing practices which seeks to create trust in the global market. It states that all precious metals traded on the wholesale market must come from a reputable source. Any gold obtained from conflict and risk areas must be procured with appropriate due diligence and must not contribute to terrorist financing nor promote money laundering or allow human rights violations. Certified manufacturers are subject to an independent audit every 12 months. Any company failing to comply with the LBMA programme will be removed from the Good Delivery List.
OECD guidelines and the five-step due diligence framework
The Responsible Sourcing Program is based on the framework employed by the OECD Guidelines on Due Diligence in Supply Chains of Minerals Extracted from Crisis and Conflict Regions. The LBMA framework consists of five steps:
- Step 1: Implementation and use of high-performance management systems.
- Step 2: Identification and assessment of risks in the supply chain.
- Step 3: Development and implementation of a management strategy to deal with identified risks.
- Step 4: Involvement of independent third parties in the annual audit of supply chains.
- Step 5: Public reports on compliance with supply chain due diligence.
The LBMA Good Delivery List and its significance for end customers
Only manufacturers who meet all LBMA requirements and receive LBMA certification are permitted to trade gold on the London Bullion Market. These approved manufacturers are listed in the organisation’s Good Delivery List, which is constantly updated. This list can be viewed by precious metal dealers and end consumers alike. Unfortunately, gold products are not individually marked with an LBMA seal. However, the listed producers in Switzerland include Argor-Heraeus, Metalor, Pamp, Precinox and Valcambi. For gold buyers, this means that if they purchase gold bars or gold coins from LBMA-certified manufacturers, they can rely on product quality, transparent delivery routes, and compliance with high environmental and social standards.
© Luftbildfotograf - stock.adobe.com
So, when the question arises as to whether extended concepts such as Fairtrade Gold or Green Gold are really necessary, the answer must be: Yes – because these initiatives support reputable artisanal miners who simply cannot secure LBMA certification.
The reputation of certified manufacturers
Manufacturer certificates such as those from the LBMA, Fairtrade or Green Gold, are highly valued in the precious metals trade. Gold products from LBMA-certified manufacturers in particular are available from most specialist retailers and banks, and are accepted worldwide. This seal of approval stands for the quality and purity of the gold, and provides an assurance of fair working conditions, a high level of environmental awareness, and guarantees unblemished supply chains.
Fairtrade gold products, on the other hand, are often only available from select specialist retailers. This is due to the rather limited range and sometimes longer delivery times associated with these products. And it is not uncommon for a green gold series to be temporarily, or even completely, discontinued due to general delivery difficulties. So the range of products obtainable via sustainable programmes from renowned refineries is greater and far more stable.
However, Fairtrade certificates do have a direct impact on pricing in terms of premium and spread. Because unlike common, large-series and frequently-requested bars and coins, buyers usually have to dig a little deeper into their pockets for these special issues. This is primarily due to the increased effort involved in production and transport. And as a direct result of the predominantly low circulation of green gold, the spread (i.e. the difference between the purchase and selling price) for dealers is often lower than that of LBMA gold. This makes this particular product group less attractive for specialist dealers in terms of income potential. Nevertheless, ethical gold is not without its attractions as an alternative and extension to an existing product range, because specialist dealers can then offer their customers greater choice and a better service.
Recycling versus mining
Gold is one of the few raw materials that can be used over and over again. And since gold extraction is itself a complex process, precious metal recycling is very important. However, a distinction must be made here between high-quality scrap gold such as jewellery, old coins or dental gold and the low-quality scrap gold recovered from electronic waste. From an environmental impact perspective, gold recycling requires significantly less energy than mining. This ratio approximately equates to a factor of 600 – which means around 600 times more energy is needed to extract and process a kilogram of mined gold as compared to the energy required for the recovery of a similar amount of recycled gold. It is also important for buyers of bullion gold to understand that recycled gold is not an inferior product. It has the same high fineness – often as much as 999.9/1000 – as gold obtained from primary (mined) sources. There is also absolutely no distinction made between secondary gold and primary gold in terms of its subsequent resale value.
Europe in particular has numerous refineries that specialise in recycling gold and other precious metals, or undertake this in addition to their processing of primary gold. These include refiners like Valcambi from Switzerland, the German refineries C. Hafner and Heimerle + Meule, as well as Münze Österreich and Umicore from Belgium. Furthermore, the Swiss-German refiner Argor-Heraeus has also developed its own Circlear program, a particularly resource-saving method of gold recovery.
Mining producers can only dream of such processing economies. Although operators are constantly optimising their processes, primary gold mining is one of the most energy-intensive industries. The same applies to artisanal mining operations, albeit to a lesser extent. From this point of view, the legitimate – though hypothetical – question arises as to whether mining itself could be largely dispensed with for the obvious benefit of the environment. But this question can be quickly answered: Only around 30% (1,300 tons) of today’s total annual global demand can be met by recycled gold. The rest is extracted from primary sources. To put it another way: This action would result in a huge deficit.
It is also worth noting that traditional gold mining creates many jobs, often in regions where no alternative employment exists. Mining operations thus secure the livelihoods of numerous families. In addition to environmental protection issues, remuneration and working conditions are also a crucial feature – especially in small-scale, artisanal gold mining.
Moreover, conscientious and controlled mining has changed enormously in recent decades. Old, exhausted mines are being shut down and dismantled to undergo environmentally friendly ‘renaturation’ (ecological restoration). In addition, companies are now using modern technologies such as satellite gold prospecting. Would you like to find out more?
You can learn about the importance of gold for societies, cultures and economies, both now and in the past, in an exciting documentary film produced by the World Gold Council. Accompany British actor and musician Idris Elba on his global journey which traces the intertwined history of gold and people. Discover why gold is an element that continues to be of great importance to us and to our development. Idris Elba will introduce you to the largest and most modern gold mines in the world.
You are currently viewing a placeholder content from YouTube. To access the actual content, click the button below. Please note that doing so will share data with third-party providers.
More InformationWorld Gold Council
The World Gold Council (WGC) was founded in 1987 as a membership organisation for global mining companies. The association is committed to ensuring that gold is given the status of a strategic asset. In addition, the WGC helps to ensure the future of a responsible, sustainable and accessible gold supply chain. To this end, an international team of researchers and analysts are constantly developing the wide range of applications and opportunities that gold offers. One particular outcome of this initiative is “GOLD”, a documentary film linked above, which is well worth seeing.
Through representing the needs of the gold market, gold mining, private investors and central bank gold reserves, the WGC has developed relevant industry standards for conscientious, conflict-free gold mining. These standards include the “Responsible Gold Mining Principles” (RGMPs), a framework that sets out the principles of gold mining and takes into account the expectations of consumers, investors and the downstream supply chain. The “Conflict-Free Gold Standard” was also introduced in 2012, addressing any potential links between precious metal operations and armed conflicts. To the same purpose, the WGC is also implementing the OECD due diligence guidelines described above to promote responsible supply chains suitable for conflict and high-risk areas.
Conclusion: Are customers willing to pay more for gold with an "eco-label"?
Sustainable and fairly produced gold is an important issue for consumers which has become a relevant consideration for both jewellery production and the purchase of bullion products. According to precious metal retailers, most customers trust manufacturers with LBMA certification, and there is also a demand for gold products from other sustainable programmes. The additional costs for Fairtrade gold and the like are not really an issue because anyone who wishes to buy sustainable gold, and specifically enquires about it, is already well informed and thus able to calculate the surcharges involved. The problem is more that the supply of Fairtrade gold is sometimes limited and its availability can be slow. However, those who want to buy gold in larger quantities often shy away from surcharges and tend to go for a very good product with LBMA certification. Specialist retailers who can offer and procure both these kinds of gold on behalf of their customers have an obvious advantage here.
A summary of sustainably certified gold
- Monitoring bodies such as the London Bullion Market Association (LBMA) and the World Gold Council (WGC) are committed to sustainable gold production and fair gold trading worldwide.
- To implement their tasks and goals, these organisations have developed relevant standards promoting responsible gold mining and conflict-free supply chains.
- LBMA-certified Good Delivery bars are traded worldwide and enjoy a high reputation among precious metal dealers and end customers.
- Certificates such as Fairtrade Gold or Green Gold were created to support small-scale, artisanal gold miners.
- Only companies prepared to adhere to the strict requirements covering environmental protection and working conditions are allowed to employ these coveted eco-labels.
- Consumers wishing to buy sustainable gold bars or gold coins can choose between products from LBMA-certified manufacturers and other eco concepts, and should consult a specialist precious metal retailer who carries both products.
- In general, end customers should expect higher surcharges when purchasing Fairtrade gold.
- Recycling old gold plays an important role in annual gold production. Its particular attraction is that recycling uses significantly fewer resources than gold mining operations.
