The EU’s Digital Product Passport: What It Is, Why It’s Important, & How It Will Impact Supply Chain Sustainability

The Digital Product Passport is part of a growing initiative to promote supply chain visibility and product sustainability. But what is it, what will it do, and what steps should manufacturers take to prepare for it?

The EU’s Digital Product Passport: What It Is, Why It’s Important, & How It Will Impact Supply Chain Sustainability

What Is a Digital Product Passport? 

In March 2022, the European Commission published a proposal called the Ecodesign for Sustainable Products Regulation (ESPR). Dubbed by the European Commission as the “cornerstone of the Commission’s approach to more environmentally sustainable and circular products,” the regulation features a broad set of requirements for manufacturing products that promote and prioritize sustainability through greater durability, reusability, and circularity. 

In addition to these new ecodesign requirements—which replace the preexisting Ecodesign Directive—the ESPR also introduced the Digital Product Passport (DPP). The DPP is a so-called “data carrier” that must be affixed to all products that fall under ESPR. It may take the form of a QR code, RFID tag, or other form of scannable technology. As required by the ESPR, the DPP will contain a bevy of information about a specific product and its sustainability. This includes a breakdown of materials and where they were sourced; the recycled content incorporated into production; and detailed supply chain mapping. 

Why Is the Digital Product Passport Being Implemented? 

The DPP is part of a much broader effort by the European Commission to move companies and manufacturers toward developing products that are more sustainable. While “sustainability” has become an inescapable buzzword across various industries and governments in recent years, in the context of ESPR it refers to specific, concrete features. 

The DPP is intended to help consumers and businesses gain a more complete understanding of a product’s life cycle, durability, and the extent to which recycled parts were used in its production. The idea is that, by establishing high levels of supply chain visibility, transparency, and accessibility, manufacturers, distributors, and customers will all possess the data and information necessary to make more educated, informed choices that reflect the increasing importance of sustainability and circularity.  

Where Is the Digital Product Passport Being Implemented? 

As the DPP and the ESPR are being implemented by the European Commission, these regulations will affect the 27 countries that comprise the EU. These include 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. 

Because of the global scope of the supply chain for many products, however, the requirements of the DPP will almost certainly be felt worldwide. This holds especially true for industries—including electronics—whose products contain dozens or even hundreds of components that are sourced from all over the world. The DPP will heighten the pressure and accountability on all parties in a given supply chain to increase transparency and enhance their data-gathering processes.  

Timeline for Implementation

The European Commission is planning on rolling out DPP regulations in a staggered fashion. Batteries will be the first product category to be legally required to comply with DPP, sometime in 2026, with apparel and consumer electronics following shortly thereafter. The Digital Product Passport will eventually be required for roughly 30 categories, with the implementation timeline spanning from 2026 to 2030.  

Who Is Affected by the Digital Product Placement? 

From a product perspective, 30 categories will eventually be required to include a DPP on their goods. These categories include—but are certainly not limited to—batteries, apparel, electronics, and construction materials. 

On an individual product basis, the DPP will affect virtually every party along the supply chain, including manufacturers, distributors, and consumers. And because the information requirements are so specific and even granular, every supplier and manufacturer of a component that goes into a final product regulated by the ESPR must be contributing to the DPP data collection process. 

Advantages of a Digital Product Passport 

According to the European Commission, the Digital Product Passport will “help consumers and businesses make informed choices when purchasing products, facilitate repairs and recycling and improve transparency about products’ life cycle impacts on the environment.” In other words, the DPP, which some have taken to calling a “digital twin” to the physical products in the EU marketplace, is going to give key stakeholders substantial and immediately accessible knowledge about the products they buy and sell. 

Instead of having to carry out extensive and time-consuming research into what products were manufactured in a way that prioritized sustainability and circularity and minimized carbon emissions, buyers and sellers will be able to have that information at their fingertips for hundreds and eventually thousands of products. The European Commission’s hope is that such a dramatic enhancement in 360 degree transparency—via both supply chain visibility and product traceability—will encourage manufacturers, customers, and everyone in between to be more discerning and conscientious about the environmental impact of the goods that cycle through our society. 

How DPP Will Affect Supply Chain Sustainability 

Supply chain sustainability refers to the ways companies and manufacturers can incorporate the key tenets of sustainability—including ethical sourcing, decarbonization, and limiting waste—into the intricate, often global networks that develop the products they ultimately bring to market. 

There is little doubt that the implementation of the Digital Product Passport over the next half-decade or so will have an immensely positive impact on supply chain sustainability. With the vastly improved supply chain transparency that the DPP will usher in, businesses will be able to see and understand the energy usage, waste, carbon emissions, and labor practices that go into the development of their products with greater consistency and clarity than ever before. These new levels of knowledge and information will empower companies to demand higher sustainability standards throughout their respective supply chains. They’ll have the ability to hold all stakeholders accountable for implementing greener, safer, and more humane procedures and protocols. 

Challenges of Implementing the Digital Product Passport System 

In its early stages, the implementation process of the EU Digital Product Passport will present a myriad of significant challenges. Most importantly, the DPP mandate will require all parties along the supply chain to be significantly more diligent and even meticulous in their efforts to collect and maintain information on their products. This means that the various manufacturers that participate in a given supply chain will need to possess a more complete understanding of design, components, recyclable parts, and circularity, among other features. The initial transition into this level of detail and transparency will almost certainly be costly, time-intensive, and prone to error. 

In addition, because of the way the DPP is going to illuminate every corner of the supply chain, companies and manufacturers may have to reckon with questionable labor practices that had not previously come to light. These might include poor working conditions in overseas factories, the use of conflict minerals, and even forced labor. While this may present a logistical challenge for businesses, it is a means to an unquestionably virtuous end. By spotlighting unethical conditions and circumstances along the supply chain, the DPP will forcefully compel companies to either hold guilty parties accountable or root them out entirely. 

Further down the supply chain, the introduction of the DPP will give retailers a new layer of factors to consider when determining what products to buy and how to fill their inventories. Keenly aware of the fact that their customers will have immediate access to each product’s origin, raw materials, energy usage, carbon footprint, and other sustainability data, they will feel a much greater sense of responsibility—or even outright obligation—to be more selective and discriminating in the goods they choose to sell. This is by design, and is indeed one of the chief objectives of the ESPR and DPP. By increasing transparency to all parties, including and perhaps especially consumers, the European Commission is establishing a higher level of accountability for retailers (and manufacturers). No longer benefitting from the opacity that has been the default condition for most supply chains for decades, sellers will have to start incorporating sustainability and circularity considerations into many of the products they stock. 

Challenges for Complying with Digital Product Passport Requirements 

In the electronics industry more specifically, the fast-approaching era of the EU Digital Product Passport may serve as a catalyst for significant and even transformative change. The electronics industry has seen stratospheric growth over the past several decades, but there has been an accompanying rise in the amount of electronic waste that it produces. In fact, electronics hold the dubious distinction of being the world’s fastest-growing waste stream. In 2021, there was a staggering 57.4 million tons of e-waste. (Crucially, only 20% of the total waste from electronics is recycled.) 

These discarded cell phones, laptops, smart devices, and a plethora of other consumer and industrial electronics are ultimately either dumped in landfills or shipped to incinerators, where they release hazardous substances into the atmosphere. Put simply, the electronics industry has long adhered to a linear supply chain that ends in ever-increasing amounts of waste. And with so little being recycled, this trash continually poses logistical challenges and environmental threats to individuals and their governments. 

In order to achieve compliance with the DPP and demonstrate to consumers that they are not harming the environment and/or engaging in unsustainable production practices, electronics companies will have to adapt. Namely, the industry will need to transition from a linear supply chain model to one that embraces circularity. Circularity—a concept that’s gained a great deal of traction in recent years—refers to a product or resource’s ability to be reused, recycled, or regenerated in some way. The electronics industry must start devising and developing strategies that allow products to be utilized beyond a single life cycle. For example, in anticipation of the implementation of the DPP, electronics manufacturers should start finding ways to incorporate more recycled materials into their products, and have methods in place for recycling those products when they reach end-of-life. 

Evolving from a strictly linear supply chain to a more circular one is a powerful way to work toward supply chain sustainability. But such a drastic transformation will not come easily. In some ways, electronics companies and technology firms actually reap tremendous benefits from the linear supply chain model. When smartphones, computers, tablets, and other technology are thrown away because they’ve become defective, obsolete, or simply no longer fashionable, that feeds a perpetual demand for their replacements. The compulsion to regularly replace our devices with newer, more cutting-edge hardware is incredibly profitable to these businesses. 

Moving toward supply chain sustainability will demand a major paradigm shift. Companies will need to start developing products from recycled materials and consumers will need to start using those products for longer. Because of the way it will create access and visibility into the nuts and bolts of sustainability—how a product was made, the amount of energy and waste that went into its production—the DPP can play a profoundly influential role in facilitating this paradigm shift. 

Where Can You Get the Data to Comply with a Digital Product Passport? 

The implementation of the DPP in the EU will force innumerable companies that do business in Europe to significantly ramp up their data-gathering infrastructure. Supply chain visibility and supply chain management will become even more critical to businesses that want to comply with the new regulations, adapt to the evolving expectations of governments and consumers, and thrive in an era in which sustainability metrics can be accessed and evaluated by virtually all key stakeholders. 

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