Ethical Grading: What It Is, and Why It Matters

Honest grading is more important than ever in a diamond industry facing direct threats to its credibility.

Confidence, transparency and reliability. These three elements are essential when it comes to expressing the value of a diamond. Without them diamond prices collapse. This is why the gemological standards and associated terminology developed by the Gemological Institute of America (GIA) in 1953 have become widely used by the industry.

This grading system has allowed the trade and consumers to easily and consistently differentiate between the quality of various diamonds and, hence, the associated price. While there are other grading systems, the use of GIA grading classification and terminology has become the widely used benchmark. This benchmark, nonetheless, is only of value if those using it maintain consistent standards.

However, despite its role in safeguarding the legitimacy of the diamond trade, this grading standard is under attack. Unscrupulous laboratories have been using GIA terminology to misrepresent diamond quality by overstating color and clarity. The result has been a cloud of confusion, inconsistency and misrepresentation.

Because there’s a third-party grader, the customer has an independent person they can trust.

Pratik Shah of Star Rays, Mumbai

Credibility and consistency

While laboratories have been named and shamed, and in some cases had to shut down their operations, the problem persists. Protecting the credibility and consistency of grading is something the industry can never shy away from.

This is especially so given the threat posed by synthetic diamonds entering the supply chain and being passed off as natural. This threat has placed a great onus on grading companies to earn the industry’s confidence and demonstrate transparency and reliability.

“Over the last few years, diamond grading has become very important,” said Pratik Shah of Star Rays, Mumbai. “[Because] there’s a third-party grader, the customer has an independent person it can trust.”

This trust is key. Overgrading and passing off synthetic as natural, not only undermines consumer confidence, it destroys it. This is why the future of the diamond trade relies on honest, legitimate and credible grading companies. “[Grading] helps the customer understand the quality of the diamond,” said Shah. “The grading standards are relatively easy, but [the customer] may not understand the quality of the stone by seeing it. But he will trust to buy the stone based on the grading. If [a company is] new to grading, people will not trust them easily.

“However, because of third-party grading, dealers and traders in the industry are also able, to an extent, to believe in the grading. In the past traders had to go to places like India and Israel to see the stones. Now they can buy them on the internet with the help of grading and photographs.”

We diamond dealers, we stopped buying for the beauty and started buying for the certificate.

Elan Nachassi,
House of Diamonds,
San Diego

Constant attack

However, despite the obvious benefit to the trade, transparent, honest grading is constantly under attack. Overgrading has become institutionalized. Retailers chasing greater profits have become eager buyers of overgraded diamonds. And there has even been media reports of genuine natural diamond grading certificates issued by reputed international gemological institutes being sold on the black market.

Honest grading is therefore now more important than ever to the long-term viability of the diamond trade. So too is the ability of the industry to communicate value over and beyond what is simply written on a certificate.

“The public doesn’t really know what grading is,” said Elan Nachassi, president and CEO, House of Diamonds, San Diego. “We diamond dealers, we stopped buying for the beauty and started buying for the certificate. Everyone’s just dealing with certificates and pieces of paper but they forget the beauty.”

This is a valid point. A diamond industry that no longer appreciates the beauty of the very product it sells has truly lost its way. We cannot lose sight of that beauty. But we do need to be able to communicate it to consumers so they have the 5th C of diamond grading – confidence.

And in an industry facing a significant threat from laboratories that overgrade diamonds, providing consumers confidence through honest, clear grading is the only way the diamond trade can help secure its future.

Image: IIDGR