Who needs to comply with Digital Product Passport?

Digital Product Passports (DPP) is a blockchain-based tool for collecting and sharing product data throughout its entire lifecycle, which will gradually become mandatory in the EU for a range of different products. It is used to highlight a product’s sustainability, recyclability level and environmental impact. Everything from raw material sourcing to manufacturing process details is captured on the DPP.

Businesses adopting Digital Product Passports aren't just being innovative. The European Union is introducing new regulations and policies under the European Green Deal (EGD) to help Europe reach zero net emissions by 2050.

From this article, you will learn:

1. What products have to comply with DPP?
2. What are the challenges of DPP implementation?
3. How can your business benefit from DPP?

Digital Product Passports is a new initiative that will become mandatory:

The European Commission plans to gradually introduce rules for the Digital Product Passport (DPP). The DPP acts like a special "data carrier" that must be attached to all products covered by the ESPR. It could be a QR code, RFID tag, or another scannable technology. Following the ESPR rules, the DPP is made to contain information about a specific product and its sustainability. This includes detailed info about the materials used, where they come from, how much recycled material is used, and a complete map of the product's supply chain.

First products to comply with DPP are batteries, and these rules are set to begin in 2026. After batteries, next are clothes and electronic gadgets. The idea is to expand the use of the Digital Product Passport to cover about 30 different types of products by 2030. A detailed schedule of which industries will be next in line has not yet been published.

Where will the Digital Product Passport be implemented?

These rules will affect the 27 countries in the European Union: Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.

However, because products that will have to comply with DPP are manufactured all over the world and imported to the EU, new rules will also have a big impact globally. This is especially true for industries like electronics, where products have many parts from different places. The DPP rules will make it more important for everyone in the supply chain to be clear about where their products come from and how they're made. It means they need to get better at collecting and sharing information.

Who needs to comply with the Digital Product Passport?

Around 30 product categories will have to comply with Digital Product Passport (DPP). These categories encompass a wide range, spanning from batteries, clothing, and electronics to construction materials and vehicles.

1. Ecodesign for Sustainable Products Regulation (ESPR): Currently in the proposal stage since its publication in March 2022, ESPR stands as a pivotal element of CEAP. It aims to enhance the overall circularity and energy as well as environmental sustainability performance of products. The framework outlines guidelines and benchmarks covering various aspects such as product durability, reusability, resource efficiency, and carbon footprints. The proposed regulation emphasizes the use of a Digital Product Passport solution as the primary mechanism for capturing and sharing data, offering stakeholders a detailed breakdown of a product's sustainability credentials.
2. EU Strategy for Sustainable and Circular Textiles: In the implementation stage as of March 2022, this strategy is another cornerstone of CEAP. It focuses on advancing the overall circularity of textiles in clothing, buildings, vehicles, and more. The primary goal is to improve the longevity and durability of textiles, facilitating ease of repair and recycling. The legislation also includes a significant consumer/end-user component, empowering them to verify the 'green claims' of companies from which they purchase textile products. As per the official regulation, Digital Product Passports will play a crucial role in enabling this mechanism and achieving these goals.
3. Construction Products Regulation (CPR): Currently in the implementation stage as of March 2022, CPR is another integral part of CEAP. It concentrates on ensuring that construction products across Europe adhere to safety and environmental criteria. The framework being developed supports the use of Digital Product Passports.
4. (New) EU Battery Regulation: Currently in the proposal stage since its publication in December 2020, this regulation is another significant aspect of CEAP. It focuses on ensuring the sustainability and safety of batteries within the EU, emphasizing high levels of recyclability. Implementation is planned over the coming years, with 2026/7 proposed for its enactment in the industrial and EV car battery markets. Once again, a Digital Product Passport (or Battery Passport as noted) will be the key solution driving this regulation.
5. Corporate Sustainability Reporting Directive (CSRD): Initiated in January 2024, CSRD mandates listed companies (except micro-companies) and large companies (meeting 2 out of 3 defined criteria: 250+ employees, €40m+ turnover & €20m+ total assets) to report on sustainability and ESG issues. This detailed reporting supports the transition towards a more 'green' and sustainable economy.

At the level of individual products, the DPP is poised to impact virtually every participant in the supply chain - manufacturers, distributors, and consumers. Every supplier and manufacturer of components being part of a final product regulated by the Ecodesign for Sustainable Products Regulation (ESPR) is obligated to participate in the DPP data collection process.

Challenges of Implementing the Digital Product Passport System 

Putting the EU Digital Product Passport (DPP) into action will be challenging, as it requires everyone in the supply chain to collect and keep detailed info about their products. Manufacturers will have to know more about how their products are designed, what parts they use, if they can be recycled, and more. Using batteries as an example, which will be the first product category where more data will need to be collected - battery identification in the form of a unique identifier; basic battery characteristics, including type and model; performance and durability statistics will also need to be updated during the battery's life cycle by parties repairing or repurposing the battery. Getting used to obtaining and maintaining this level of detail and transparency will not be cost and time free.

The DPP will shed a light on the whole supply chain, revealing any questionable labour practices that were hidden before. This could include bad working conditions in factories overseas, the use of conflict minerals, and even forced labour. While this is a challenge for businesses, it's a good thing in the end. The DPP will make companies either hold the responsible parties accountable or get rid of them.

As we go down the supply chain, the DPP will make things more complicated for retailers. They'll have to think more about which products to get and how to manage their stock. Since customers will know where each product comes from, what it's made of, how much energy it uses, and other sustainability info, retailers will feel a stronger responsibility to choose products more carefully. This fits with the main goals of the Ecodesign for Sustainable Products Regulation (ESPR) and DPP – to make things more transparent for everyone, especially customers, and make retailers and manufacturers more accountable. With no more secrets in the supply chain, sellers will have to think about sustainability and recycling when deciding what products to sell.

What are the benefits for business?

• New Business Models: Going circular and focusing on making products last longer opens up new and clever ways of doing business. One example is the product-as-a-service model, where you don't just sell the product but also offer services like repairs. This can bring in more money and help the business grow. Digital Passports also become a way to market and sell products, offering new services and making the overall customer experience better.

• Increase Consumer Trust: Keeping detailed records of a product's entire life, from making it to recycling, gives consumers a clear and honest picture of the product's history and condition. Since over half of consumers agreed that the companies only pretend to be sustainable, this transparency builds trust, making customers more likely to stick around and stay loyal.

• Validate Green Claims: To tackle the problem of businesses making false claims about being environmentally friendly (greenwashing), Digital Passports use blockchain to secure and confirm sustainability features and statements. This is important because more than half of consumers find it hard to tell if a company's claims about being green are true. This not only protects a company's reputation but also lets them improve their circular strategies, making them leaders in sustainability to meet growing customer demands.

• Consumer Protection: Making sure that raw materials and how products are made follow set standards keeps customers safe from fake, dangerous, or low-quality products. This also helps brands avoid bad publicity, like having to recall products or dealing with issues caused by defects.

• Ensure Compliance: Given the complexity of supply chains, companies may struggle to monitor adherence to regulations and ensure sustainability. Digital Product Passports serve as a unified and transparent source of information, simplifying data oversight. This enables businesses to stay confidently on course with initiatives in real-time, assuring them that suppliers must meet standards, providing clarity on the quality and origin of delivered products.

Will this actually work?

The regulation concerning Digital Product Passport holds the potential to become another impactful implementation akin to GDPR, bringing a meaningful shift in data practices. This stands in contrast to the Omnibus Directive, where companies often circumvent regulations by artificially inflating prices 31 days before a planned reduction, creating an illusion of a significant price drop.

However, potential alone is not sufficient; the effectiveness of this regulation hinges on companies embracing it. Failure to comply, especially by suppliers and importers, could pose significant challenges for retailers who import products. The EU must ensure that businesses not only comply but also see the value in transparency, viewing it as an opportunity rather than an additional burden. Balancing the equation of compliance and benefit is crucial for the success of Digital Product Passport in fostering a culture of responsible data practices across the business landscape.

Potential solutions that Frontkom may help you with

Digital Product Passport can be implemented within your existing PIM system. If you already have a PIM product management system, you can store the data you will need to collect in it. The most important thing is to plan how to display the information to the end-user, in a way that does not only comply with the new regulation, but also supports your sales and marketing efforts. 

If PIM is not part of the existing IT ecosystem, you can consider implementing one. Frontkom has experience in integrating with various PIM providers and will be happy to guide you through the process.

If you don't need an extensive data storage system, but still have to comply with DPP rules, you can consider a simple solution such as a one-page website tailored specifically to your industry and your needs. 

Frontkom works on a daily basis with customers to whom it has implemented such a solution and maintains it. We have experience working with a wide variety of PIM software providers, such as InRiver, Akeneo, Pimcore. We are happy to meet to understand your needs and propose the most optimal and effective solution.