In the first part of our digital product passport (DPP) blog series, we speak to a range of experts in various industries about the reasoning behind the introduction of DPPs and the potential challenges businesses face.
Sustainability has become top of mind for businesses across several industries. Increasing pressure from consumers, governments, suppliers, and regulatory bodies necessitates a reduced carbon footprint and adherence to sustainability targets. Digital product passports, a key component of the proposed Ecodesign for Sustainable Products Regulation, constitute a key action under the Circular Economy Action Plan (CEAP). In this blog, we discuss further the concept of digital product passports and outline the measures businesses should take to prepare.
What is a digital product passport?
A digital product passport is a secure digital record containing key information about a product throughout its lifecycle. It includes details such as specifications, manufacturing processes, and distribution data, promoting transparency and accountability among stakeholders.
Louise Bünemann, Head of EU environmental policy at the Confederation of Danish Industry, explains during our conversation: "The idea of the DPP is to improve the dialogue within the whole value chain, not just tracking a product's origin but understanding its composition and use.”
“Information will be decentralized, staying within companies, making the passport distinct from a physical one. It could be a physical website, but the goal is to develop a system that extracts data from every source, such as an ERP system, and automatically structures it into a passport-like format.”
Lars Brunn, Senior Commerce & PIM Specialist at Columbus, points out the vendor's responsibility when introducing products to the EU: "You must share detailed information with various parties, including end users, subcontractors, and those selling or using the product. This goes beyond merely providing a serial number on the label."
Who will need to have a digital product passport?
In essence, any business that introduces a product to the European market will require a digital product passport. The first wave of legislation covers industries such as textiles, apparel, batteries, and consumer electronics. Food and pharmaceuticals are currently excluded.
In our discussions, Magnus Nikkarinen, Senior Policy Director of Sustainability at Swedish Commerce, emphasizes the importance of information flow both upstream and downstream. Notably, he highlights that the Commission has deprioritized electronics for end products.
According to Louise Bünemann, Head of EU environmental policy at the Confederation of Danish Industry, the Commission plans to present a consolidated working plan in Q1 of 2025. This plan will include both the "new" categories, like textiles, as well as the "old" ones, such as electronics, which are related to energy.
Why are digital product passports being introduced?
There are several factors that have led to the introduction of digital product passports. Firstly, they enable tracking and verifying a product’s origin, composition, and environmental impact, promoting transparency in the supply chain. This, in turn, supports sustainable practices such as recycling, reusing, and responsible disposal.
Digital product passports also allow businesses to implement circular economy principles and enhance sustainability efforts by designing products with disassembly and recyclability in mind. Consumers benefit by understanding a product's environmental impact, enabling them to make eco-friendly purchasing decisions.
“For the fashion industry, digital product passports have come out of a need to communicate to consumers,” says Louise Bünemann. “In the EU’s circular economy action plan, the idea is to create more dialogue in the value chain, focusing on production, raw materials, and the entire value chain. Consumer organizations in Denmark say the digital product passport can make products more circular and sustainable, so it's not just a tool for consumers.”
Helene Behrenfeldt, Industry & Solution Strategy Director - Fashion at Infor, adds: “In the Legacy fashion model, ordering goods six to eight months in advance leads to overbuying and uncertainty about selling all items. This results in significant waste, especially with consumers returning goods that cannot be reused. The industry's claims of recycling are questionable, considering the extensive carbon footprint of products traveling globally. The industry is in an overproduction state which isn’t sustainable.”
The challenges of digital product passports
The implementation of DPPs is unlikely to be straightforward. When the idea of digital product passports began to surface, the primary motivation was to provide consumers with more information about the products they buy. However, Magnus Nikkarinen, Senior Policy Director – Sustainability at Swedish Commerce, questions whether it should focus more on how it can work for businesses.
“Starting with businesses ensures that digital product passports work for them and are efficient for logistics,” explains Magnus. “If we have information that works between businesses and for authorities, it would be quite easy to ensure the right information for consumers. My main worry is that legislators and influencers are focusing too much on the consumer side.”
The businesses most affected by this development will be manufacturers, wholesalers, and companies involved in importing and assembling products from China for resale in the EU market. These organizations are anticipated to bear the brunt of the impact.
Another major challenge for retailers will be ensuring their technological infrastructure is fit for purpose so they can communicate efficiently both internally and between different stakeholders throughout the supply chain.
“In some retail organizations, we’re still talking about PDF files or Excel sheets that are working,” says Magnus “It’s imperative this is prioritized in the future to make sure that it's more efficient.”
Lars adds: “This will not only require companies to implement a new platform but also require them to take the discipline of handling product information right and correctly in accordance with what the EU legislation is. Currently, this is not a priority for many retailers.”
Henrik Leffler, Business Consultant at Columbus, also highlights his experiences with retailers: “Bigger retailers are starting to “wake up” but many of the smaller retailers in fashion I’ve met are completely unaware of this,” explains Henrik. “And as soon as you leave the garment industry, people really have no idea. We spoke to a company that sells books, for example, and they're like ‘digital passports? What are you talking about?’. So it's really interesting to see how little understanding there is for many businesses out there.”
Data gaps are also likely to occur in the value chain since it is uncommon for businesses to have complete control over all production tiers, ranging from tier 1 to tier 4. Helene gives a real-life example: "I design a T-shirt using a PLM system, knowing the composition and main supplier. However, as production progresses, information goes down to Tier 4, but not everyone shares this data for various reasons. There are data gaps, and the challenge is how to fill them. It's about data and collaboration to obtain and store the needed information."
Lars also raises the point that because data gaps will be documented, they’ll be exposed to the end customer, which brings its challenges. “Let's say it's 60% compliant because of data gaps. Some major fashion manufacturers are saying now that this number is even more important than their product, an interesting look into what the future will look like.
So businesses with an 80% compliance against 60% compliance, even if the 60% product is better, customers are likely to choose the 80% compliance product. So manufacturers will have to act to remain competitive. There'll be higher requirements.”
Longevity and granularity
The longevity and granularity of digital product passports present interesting aspects. On one hand, there's the concept of a horizontal digital product passport, proposed by the Commission, which focuses on broader characteristics like longevity and the percentage of recycled materials, applying across various product types.
On the other hand, the traditional digital product passport for specific items, such as textiles, offers a more detailed and granular approach, capturing specific information about a particular product's journey, composition, and lifecycle. The challenge lies in defining how these different approaches can coexist and complement each other in the evolving framework of product passports.
The digital product passport (DPP) is considered "horizontal," meaning it applies to various product categories. However, it's important to have consistent technical requirements across different products. For example, a DPP for plastics will be used in products that contain plastics. Keep in mind that the content of the DPP will be customized for each product, with a few specific requirements.
Discussing a textile sector case, Henrik highlights the complexity of granularity: “Identifying which of the 20,000 shredded cotton underwear pieces turns into a shirt raises questions, especially when reutilizing and recycling fibers.”
Louise adds: “The question of granularity is interesting, and we haven't received many clear answers from the Commission on this. Regarding the ECO design regulation, the legal framework will likely be voted on early 2024. However, this framework is just the beginning. Specific requirements for different product groups will be defined in delegated acts. Textiles, being a high priority, are expected to have acts addressing concerns like recycled content soon. These acts allow the Commission to establish requirements based on the legal framework.
Are you ready for DPP?
Sustainability and circularity are moving from ‘nice-to-haves’ to essential strategic focuses for organizations, brands, and consumers alike . With digital product passports fast becoming a reality, businesses must prepare for the impending legislation.
Through our discussions with experts, it's clear that DPPs will impact various industries, requiring companies to invest time aligning their practices with sustainability goals. This involves integrating digital tools for seamless product information management, tracking, and verification along the supply chain. Changes in practices and technology can take time, and with only a few years to get ready for impending legislation, starting proactive measures now is key to ensuring a smoother transition.
However, it's important to remember that the introduction of new technology or processes may face resistance in your organization. That’s why having a comprehensive change management plan is crucial to creating a culture that embraces and accepts the transformation before it impacts the project.
In the second part of this series, we discuss how businesses can evaluate available technologies, prepare for digital product passports and start acting towards implementation.
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