Best Practice Principles

1. Best Practice Principles

2. Why is BPP important ? • BPP is not a “great to be” it is a “must to be”. It is a matter of survival as a sight holder. • BPP in its current form would not be diluted much. At the most, more time may be available for its implementation. • BPP will entail huge costs upon the company. If you are incurring the costs, why not take full benefit from it. • BPP will cause a paradigm shift in the way diamond business is run.

3. How has BPP evolved ? The following have contributed in shaping the BPP in its current form: US government (with regards terrorism) • European Commission (with regards competition and anti monopolistic practices) • NGOs (with regards consumer activism) • Competitors like Rio Tinto (with regards publicity and one-upmanship)

4. Consumer Activism : Retail sector experiences • Marks & Spencer (M&S) 1998 • 2 girls discovered in factory in Morocco caused media outcry and boycott. • M&S responded with risks review and Global Sourcing Principles (GSPs) to promote safe, hygienic conditions and fair, decent pay • Suppliers’ implementation of GSPs are audited by M&S regularly • and by third party verifiers selectively (5%)

5. Competitors & Others implementing similar systems • Trade associations starting to implement systems • CIBJO & Jewelers of America • Rio Tinto implementing the BEM model • Major retailers implementing systems • Tiffany • Sterling • Zales • Wal-Mart etc.

6. Drivers : Underlying systems & laws • ISO 9001:2000 • ISO 14001:2004 • SA 8000:1996 • US Patriots Act • EU Competition Law (EU white papers) • International framework of human rights • South African Legislation

7. Main focus of BPP • Build consumer confidence in diamonds by assuring them that : Diamonds they are buying are not conflict diamonds • Treated or manmade diamonds are disclosed as such • The diamonds have been manufactured in the best possible working conditions and environment • The manufacturing process is eco-friendly • Human rights and dignity have been maintained during the manufacturing cycle • Child labour or forced labour is not used in the manufacturing of the diamonds

8. Main focus of BPP • Assure governments all over the world that DTC or its sight holders do not indulge in and in fact assist in efforts for : • Combating terrorism • Anti money laundering • Compliance with applicable national and international legislations

9. The BPP Assurance Programme “…The BPP Assurance Programme has been developed to demonstrate to pipeline partners, consumers and other interested stakeholders that the exploration, extraction, sorting, cutting & polishing of diamonds, and the manufacture and sale of diamond jewellery is undertaken in a professionally, ethically and environmentally friendly and accountable way…” BPP Assurance Programme Overview

10. Workbook Check points • Business Responsibilities • Ethical Standards • Money Laundering, terrorism financing and other financial offences • Kimberley Process Certification • World diamond Council’s System of Warranties. • Disclosure of synthetics, treated & simulants • Pipeline management & best endeavors

11. Workbook Check points • Social Responsibilities • Employment • Health & Safety • Non-discrimination & Disciplinary procedures • Child Labour • Forced Labour • Human Rights

12. Workbook Check points • Environmental Responsibilities • Best environmental practices & regulatory framework

13. Remember! A duty which becomes a desire will ultimately become a delight. • George Gritter.

14. Remember !!!!! Any fact facing us is not as important as our attitude towards it, for that determines our success or failure. • Norman Vincent Peale

15. Ethical Standards • Identification of all applicable national legislation • Registration and compliance with all applicable national legislation • Taxation (income tax, service tax, excise etc.) • Labour Laws • Fiscal & Anti money laundering laws • Local corporation laws regarding building construction etc. (Stability, BUC, Approved Plans, Raja Chitthi) • Environmental and Other Laws • Disclosure of any offense or conviction under any legislation

16. AML, Terrorism & Other Fiscal Offences • Independent audit of financial accounts by an internationally accepted qualifications • Know your customers & suppliers (details of all transactions above USD 10,000 ( As per local AML Legislation ) source of funds, final destination of sold goods, information returns submission to the government etc.) • Policies & procedures to abet or report suspected transactions • Money laundering and fiscal offences includes corruption, bribery etc.

17. Kimberley Process Requirements • Kimberley process certification • Local certification authorities and rules • World diamond council system • Policies and procedures to deal with kimberley process requirements

18. Disclosure of synthetic, treated & simulant • Disclosures for the following : Synthetics =A synthetic is any object or product that has been either partially or wholly crystallised or re-crystallised due to artificial human intervention ... • Treated =A treated Diamond is any object or product that meets the requirements specified in the definition of the word ‘Diamond’ above or the word ‘synthetic’ that has been subject to a ‘treatment’... • Simulants =A Diamond simulant is any object or product used to imitate Diamond or some or all of its properties .. Policies, procedures and training with regards the above

19. Pipeline Mgt. & Best Endeavors • Best endeavors to ensure compliance with the BPP by the company’s : • Suppliers • Customers • Contractors • Suppliers and customers not to be audited, contractors to be audited from the year 2008. • Policies, procedures and training When you think you have exhausted all possibilities, remember this: you haven’t Robert H. Schuller.

20. Social Responsibilities : Employment • Freedom to workers to make complains • Employment according to national legislation • 1 day off in 7 days • Overtime (work above 48 hrs/week) and payment of OT @ 200% of normal wages • Freedom of association & collective bargaining • Compensation & leave as per national law

21. Difficult ???? Do not tell me the problem is a difficult one. If it were not difficult, It would not be a problem. Marshal Foch

22. Employment Statutory obligations under various labour laws (Applicable to Indian entity only)

23. Health & Safety • Health & safety policy, procedures and training to employees • Standard rates of absenteeism, injuries, accidents • First aid equipment complying with law • Fire safety : fire equipment, training, drills, evacuation training, emergency exits etc.

24. Health & Safety • Food, water and sanitation • Electrical and mechanical safety • SOPs, PPEs and safety equipments • Disposal of wastes and hazardous chemicals • Temperature, ventilation, toilets, rest rooms, canteens etc. • Medical check up, dispensary, ambulance etc.

25. Non-discrimination & disciplinary procedures • Policies, procedures & training for non-discrimination, harassment etc. • Equal rights to man & women. • Right to Physically disable person. • Dismissals on petty disciplinary grounds • Any system of punishment, ill treatment (by security guards or otherwise)

26. Child Labour • Child labour not to be employed • A person below the age of 14 treated as child labour according to Indian laws and below 15 years as per DTC norms. • People between the age 14-16 can be employed subject to their having medical fitness certificate. • Special benefits, safety, good treatment of children in case if they are employed

27. Forced Labour • Freedom to leave at the end of work • Security guards not to restrict movement • Non-retention of important original documents like passport, license etc. or security deposit or deposit by any other name.

28. Human Rights • Policies, procedures and training over the same • Behavior of security guards, their training etc.

29. Environmental Responsibilities • Policies, procedures and training on environment policies, programmes etc. • Mitigate the impact of activities creating air, water or noise pollution, dangerous emissions, hazardous wastes etc. (diamond dust, noise pollution, acid fumes, generator oils, waste food, boiling acid wastes, chemicals, vehicle pollution etc.) • Dealing with environmental accidents and emergencies

30. Company policies required : • Policies or procedures for money laundering, terrorism financing and other financial offences • Policies or procedures for Training identification & action on unusual or suspicious transactions • Procedure for the Kimberley Process and the world Diamond Council Industry System of Warranties • Policies for Disclosure of Synthetic & Treated Diamonds & Diamond Simulants upon sale • Policies or procedures for allow workers to make complaints without fear of redress with regards to inappropriate behavior of colleagues. • Policies or procedures for freedom of association or worker representative bodies

31. Is BPP easy ? Everyone has a will to win but very few have the will to prepare to win. • Vince Lombardi.

32. Company policies required : • Procedures for collective bargaining • Policies or procedures on health and safety • Policies or procedures for ensuring that workers are not under the influence of, or abusing, drugs, alcohol and illegal substances

33. Company policies required : • Policy to prevent all forms of discrimination in compliance with national law • Procedure for the discrimination and disciplinary appeal • Policy on harassment, including behavior, language or gestures that are sexually coercive, threatening or abusive • Policies or procedures for excluding child labour • Policy or procedures to ensure children are not hired in error • Policies or procedures for the children to transition and remain in some form of education. Cont…

34. Company policies required : • Policies or procedures to prevent forced or compulsory labour • Policy for human rights. • Policy on environment.

35. Company policies required : • Policy on environment available to the public • Procedure for identify the risk, response to, environmental accidents and emergency situations • Procedure for preventing and mitigating environmental impacts

36. BPP Audit • First party internal audit by employees & compilation of workbooks • Second party audit by a consultant, if any, and compilation of workbooks • Third party audit by SGS (around 2 - 3 locations per sightholder per year) • Review of SGS work by independent auditors

37. Audit Procedure • Review of documentation, policies, procedures & actuals-Inspection • Interviews of management & workers-Enquiry • Legal compliances audit • Observation • Raise NC, create CAP, close NC

38. Compliance ratings • Compliant • with the Best Practice Principles • Improvement opportunity • areas of concern that need recording or following up on future compliance checks, or issues that can be readily corrected, once acknowledged • Minor non-compliance • requiring a CAP & review

39. Compliance ratings • Major non-compliance • requiring a CAP & re-check • more than 3 major breaches may result in sanction • Material breach • requiring a CAP & re-check • may result in sanction • Compliance • more than 3 major or 1 material breach may signify non-compliance with the BPPs which may result in sanctions, including restricted access to goods or withdrawal of Sightholder status

40. COMPLIANCE ASSESSMENT Compliant Improvement Opportunity Minor Breach Major Breach Material Breach Compliant Ongoing Remediation Agree Corrective Action Plan Agree Corrective Action Plan More Than 3 Major Breaches Compliant Not Compliant Monitor and Verify Monitor and Verify Compliant Under Review On target On target Off target Off target

41. Strategies to initiates ! • Pipeline mapping and restructuring of entities into tiers A,B and C. • BPP team must be notified of all changes of entities as soon as they occur • Sightholders must ensure they have an accurate list • failure to notify DTC will be considered a breach of BPP • The following internal teams should be formed for implementation : • Financial & Legal Compliances • Health, Safety, Training & Environment

42. To conclude ! • If you think you can, you can, • If you think you can’t, you are right. • Henry Ford.