Joseph Tylutki's MBA 6023 CSV Initiative Presentation

1. De Beers Diamond Company CREATING SHARED VALUE INITIATIVE PROPOSED BY: JOSEPH TYLUTKI

2. INTRODUCTION Country - Sierra Leone Company - De Beers Diamond Company History of Sierra Leone and De Beers Diamond Company (based on diamonds) Key Characteristics My Ideas for Creating Shared Value and Corporate Social Responsibility Incorporating Porters Idea & CSR Reconceiving products and markets Redefining productivity in the marketplace Enabling local cluster development Working together Conclusion

3. HISTORY OF DIAMONDS AND DE BEERS First Century AD Roman naturalist Pliny stated, Diamond is the most valuable, not only of precious stones, but of all things in this world (GIA.com) Diamonds form deep in the earth under extreme heat and pressure Diamonds were first traded in India in early fourth century BC 1800s Western Europe and United States explorers unearthed South African diamond deposits Africa controls 65% of the roughly 130 million carats mined annually De Beers controls 90% of the worlds production of rough diamonds 1888 De Beers Diamond Company is founded by Cecil Rhodes based in London 1947 De Beers coins the timeless slogan A Diamond is Forever to manipulate consumer demand De Beers was a complete monopoly until 1957 1992 the Department of Justice charged De Beers with violating U.S. Anti-Trust laws Today De Beers is still the largest diamond exploration, diamond mining, diamond retail, diamond trading, and industrial diamond manufacturer in the world (debeers.com).

4. HISTORY CONTINUED Diamonds are the most frequently used form of capitol by rebels in Sierra Leone Used to purchase weapons Immense profits were being made by smuggling blood diamonds out of the country 1935 De Beers legally took control over diamond mining in Sierra Leone By 1950 the Sierra Leone government gave up on policing blood diamonds Social and economic costs plague Sierra Leone from civil wars on diamond control Civil war between 1991 and 1999 claimed over 75,000 lives, caused 500,000 Sierra Leoneans to become refugees, and displaced over 2 million of Sierra Leones population (worldpress.com) Rebels rape, mutilate, spread HIV/Aids, and murder for diamond control Use of children are enslaved to find diamonds and patrol Although no proof has been produced De Beers has been widely criticized for dealing blood diamonds

5. KEY CHARACTERISTICS OF SIERRA LEONE Economy Political Legal Social and Cultural Global Trading & Financial Global Strategy

6. SIERRA LEONE ECONOMY 2015 Index of Economic Freedom 51.7 (World rank 147) Population = 6.1 Million GDP $9.4 Billion Growth = 6.3% 9.5% (5-year compound annual growth) Per Capita = $1,542 Unemployment = 3.2% Inflation = 9.8% FDI Inflow = $579.1 Million Economy was severely degraded from Civil War Corruption remains rampant (119/175 corruption index) Currency is the Leone ($1.00 USD = $4,236.50 Le) 2/3 of the total population are directly involved in agriculture (Accounted for 58% GDP) Mining - Mineral exports are the main currency earner ($250-$300 million USD per year) (Sierra Leone, 2014)

7. ECONOMY CONTINUED % of GDP Agriculture 58.5% Other Services 10.4% Trade 9.5% Wholesale 9% Mining 4.5% Government 4% Manufacturing 2% Construction 1.7% Electricity & Water .4%

8. POLITICAL Sierra Leone is divided into three provinces Eastern, Northern, and Southern Presidents are elected to 5 year terms based on popular vote (limited to 2 terms) Multi-party system (All Peoples Congress, Peace and Libertarian, Peoples Movements for Democratic Change, and the Sierra Leone Peoples Party) Trade unions and student unions are influential in Sierra Leones political system Ernest Bai Koroma is the current president English is the official language (Infosino, n.d.)

9. LEGAL Sierra Leone became independent on April, 27th 1961 after years of British rule Sierra Leones legal system is a hybrid of English common law and customary law Parliament Where new laws are proposed Legislative branch has 124 seats 112 chosen by popular vote (5 year terms) Judicial Branch Poorly managed and corrupt Executive Branch President is chief of state and head of government The Supreme Court Final Court of Appeal in Sierra Leone (4 Justices) Customary Legal Systems All legal proceedings and judgments conform to the constitution (Kabbah, 2006)

10. SOCIAL AND CULTURE Three years in a row the United Nations Development Program has rated Sierra Leone to have the world worst living conditions Recovering from a 10 year Civil War due to diamonds Over 10,000 people have lost limbs due to the civil war 75,000 people have killed 2 million people have been displaced Religion Animism (40%), Islam (40%), and Christianity (20%) Majority of the people live a traditional, agricultural way of life, with ruling chiefs Local Music (tribal) Strong beliefs for customs and traditions 16 Tribes are found in Sierra Leone Mende, Temne, and Limba to name a few (Kabbah, 2006)

11. GLOBAL TRADING & FINANCIAL Sierra Leone has been a member of the WTO since July, 23rd 1995 Member of General Agreement on Tariffs and Trade since May, 19th 1961 Exports of goods and services = 53.1% at $104.15 million USD Imports of goods and services = 54.43% at $81.95 million USD Sierra Leone Competitiveness Rank = 138/144 Balance of Trade = -23.33 million USD Mineral exports remain Sierra Leones foreign exchange earner at $70 to $250 million USD Illegal global diamond and gun trading is a problem ($25 million USD is said to be lost to rebel activities) (tradingeconomics.com)

12. GLOBAL STRATEGY Peace and state-building process Political stability Strengthen infrastructure on diamond exports War on corruption Create a stronger monetary policy (lower inflation rates) Reduce the current account deficit ($-1913.51 million USD by increasing exports and reducing imports) Good Governance voicing accountability and political stability and to control government corruption (Kabbah,2006)

13. FIRST IDEA De Beers to create a new process for selling diamonds that are 100% conflict free Most consumers buying diamonds have no idea where they are coming from Many certifications exist for diamond grading No actual certifications exist for conflict diamonds, just the companies word De Beers should create a new certification process which includes: Where the diamond(s) was mined Who it was mined by Which company or investor bought the diamond(s) Where the diamond(s) was cut

14. SECOND IDEA Many companies use Fair Trade to create CSR and CSV De Beers can get on board and use Fair Trade or create a type of Fair Trade system This type of movement would help promote: Better trading conditions Sustainability Higher social standards Higher environmental standards Better pay for workers

15. THIRD IDEA Roughly 1750 tons of ore needs to be extracted from the earth to find a rough 1CT diamond Diamond mines are often built in fragile ecosystems Most all diamond ore waste is left in piles and is mixed with Cyanide to dissolve waste De Beers could create CSR and SV by using diamond ore waste Help Sierra Leones communities Donate processed ore waste to local business and government Diamond ore waste can be used as strong building materials, to create roads, bridges, homes, buildings, etc.

16. INCORPORATING PORTERS IDEAS & CSR Shared Value is created in three ways: Reconceiving products and markets Redefining productivity in the marketplace Enabling local cluster development (Porter & Rivkin, 2012) Corporate Social Responsibility A companys sense of responsibility towards the community and environment in which it operates (Hill, 2014)

17. RECONCEIVING PRODUCTS AND MARKETS De Beers primary income are diamond sales Lowering cost with innovation and technology Serve different markets with recycled diamond ore waste Outreach work to better peoples living standards by donating processed building materials Access new markets by creating subsidiaries to authenticate non-conflict diamonds Consumers would then know where their diamond(s) are coming from Would serve different markets and allow accessing new one by creating jobs and different positions

18. REDEFINING PRODUCTIVITY IN THE MARKETPLACE De Beers can drive economic and social development Improve on cost, quality, quantity, and dependability of distribution by: Providing higher wages Developing new ways to recycle diamond ore waste Donating or providing a sustainable cost to local businesss, government, and communities with ore waste These ideas will simultaneously produce and redefine productivity within De Beers and Sierra Leone

19. ENABLING LOCAL CLUSTER DEVELOPMENT De Beers creating a competitive advantage Positive working conditions and business relations with: Employees Suppliers Local companies Local government Sierra Leone with the help of De Beers would be able to create a functional infrastructure for local businesses, businesses looking to relocate, and potential new businesses Help fight war on corruption within Sierra Leones government

20. CORPORATE SOCIAL RESPONSIBILITY Labor rights Civil and political rights Rights of communities, groups, and people (indigenous and tribal people) Economic, social, and cultural rights Conflict Free diamonds Rebuilding Serra Leone Creating jobs Adequate pay and benefits

21. DE BEERS AND SIERRA LEONE WORKING TOGETHER Taking resources and investing them by: Recycling Giving money to local social causes and local business needs Reporting on social and environmental impacts Engaging employees and citizens in community and business works Sustainability (protecting the future for both De Beers and Sierra Leone) Compliance (laws, code of conduct, and business principles) Rural development Defeating rebels and the conflict diamond trade

22. CONCLUSION De Beers can create shared value within its business and within Sierra Leone Using Michaels Porters ideas A new process for authenticating and selling diamonds that are 100% conflict free Creating a type of Fair Trade system Recycling diamond ore waste Creating subsidiaries on a new authentication process Lowering cost with innovation and technology Provide higher wages Positive working conditions and better business relations with employees, suppliers, and other companies Sierra Leone to create a functional infrastructure for De Beers and other businesses All of these ideas will create shared value and corporate social responsibility for local communities, businesses, citizens, employees, all while operating and working together within Sierra Leone and De Beers Diamond Company

23. REFERENCES Hill, C. (2014). Global business today (8th ed.). New York: McGraw-Hill Irwin. Porter, M., & Rivkin, J. Harvard Business Review (2012). The Looming Challenges to U.S. Competitiveness, 1-9. Porters Five Forces: Analyzing the Competition. (2015, February 18). Retrieved July 2, 2015, from http://www.businessnewsdaily.com/5466-porters-five-forces.html Gemological Institute of America: Diamond History and Lore. (n.d.). Retrieved July 6, 2015, from http://www.gia.edu/diamond-history-lore Corporate Social Responsibility in the Diamond Industry. (2011, May 21). Retrieved July 6, 2015, from https://journalofinternationalmanagement.wordpress.com/2011/05/22/corporate-social-responsibility-in-the- diamond-industry/ De Beers Diamond Company. Our History. (n.d.). Retrieved July 6, 2015, from http://www.debeersgroup.com/en/our-story/our-history.html Corporate Social Responsibility in the Diamond Industry. (2011, May 21). Retrieved July 6, 2015, from http://thegreenerdiamond.org/conflict-diamonds-2/environmental-impact/ Stanford University. Blood Diamonds. (2006, December 6). Retrieved July 6, 2015, from http://web.stanford.edu/class/e297a/Conflict%20in%20Sierra%20Leone.htm

24. REFERENCES CONTINUED Sierra Leone. (2015). Retrieved July 10, 2015 from, http://www.heritage.org/index/country/sierraleone Infosino, C. (n.d.). Political Systems in Sierra Leone | The Classroom | Synonym. Retrieved July 10, 2015, from http://classroom.synonym.com/political-systems-sierra-leone-12547.html Kabbah, H. (2006, November 1). GlobaLex - Sierra Leone Legal System and Legal Research. Retrieved July 10, 2015 from, http://www.nyulawglobal.org/globalex/Sierra_Leone.htm Sierra Leone Balance of Trade | 2000-2015 | Data | Chart | Calendar. (2014). Retrieved July 10, 2015 from, http://www.tradingeconomics.com/sierra-leone/balance-of-trade Sierra Leone Continues to Have World's Worst Living Conditions - 2002-07-25. (2009, October 29). Retrieved July 10, 2015, from http://www.voanews.com/content/a-13-a-2002-07-25-23- sierra-67433557/384298.html F, P., Y, B., J, W., & J, Z. (2013). Retrieved July 10, 2015, from http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/2013-2017 - Sierra Leone Country Strategy Paper_01.pdf

Joseph Tylutki's MBA 6023 CSV Initiative Presentation

Education

diamond mining

diamond trading

diamond retail

sierra leone government

year sierra leone

beers controls

history of diamonds

sierra leoneans