Digital product passports are going to present a particular data challenge for brands and manufacturers who will need to set up more advanced systems for collecting, governing and sharing data. This article will look into the types, the details and the impact of the imminent product passports.
In general, a digital product passport enables businesses to collect and share information from a product’s lifecycle in order to enable consumers and business partners to make more informed buying decisions and how to dispose or recycle the product.
The result is a digital record containing multiple themes of data, for example from disposal to recyclability and potentially a product’s environmental footprint, containing information about its raw materials through the product’s various steps in the manufacturing and supply process.
This information must be made easily available to stakeholders in an easy-to-understand manner. The content requirements of a DPP are discussed here later.
In essence, product passports are intended to solve the information problem regarding circularity and impact on natural resources.
How can stakeholders, ranging from manufacturers to resellers, consumers, authorities and NGOs track and verify products and their components throughout their lifecycle and measure their environmental impact?
It’s important to understand that there are two concepts of DPPs. Each one of them requires effective data management. For the sake of convenience, we can call them:
There is a proliferation of industry-led passports emerging, i.e., the brand-driven DPPs (plural). These are used as a tool for brands to better communicate with consumers regarding extended data around products.
Some companies use these brand-driven passports to try to get ahead of the curve, such as the fashion brand Nobody’s Child or, in the case of Siemen’s battery passport, it augments required regulatory information with additional data to enhance their brand.
The brand-driven DPP is thus an endeavor to identify and define a set of data requirements and infrastructure to deliver data not only to measure the circularity economy related to a product but also brand-specific initiatives. This makes it similar to the EU regulatory passport and will likely make it easier for the company to adapt to the EU DPP when this becomes mandatory.
Brand-driven product passports are created and communicated as the brands themselves find fit. This means they can follow very different policies. Possibly, there will be more than one format or a merger of several passports over time.
Brand-driven DPPs can include data themes, such as authenticity, provenance, brand values in addition to related product and community data, traceability, digital collectibles, carbon footprint, water usage, maintenance schedule, authorized repairers, disposal, recycling and so on. The point is, it’s going to change over time and grow.
The regulatory DPP (singular) is an EU requirement for sharing very specific detailed product information and aspects of the product’s environmental impact and circularity.
The law is expected to be rolled out gradually until 2030 with the use of DPPs to be mandatory within the EU market for the industrial and EV battery sector as soon as 2027, followed by fashion and other industries.
The proposal pertains to physical products on the European market in all product areas, except for food, animal feed and medical products, for which other legislation applies.
What is common for both the regulatory and the brand-driven passports is that in one way or another they are connected to products and data.
The regulatory DPP being proposed by the EU is yet another sustainability requirement next to hundreds of other standards and reporting frameworks, such as the Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative (GRI) that operates across more than 140 different topics, and not least the 17 UN Sustainability Development Goals.
There are multiple ongoing threads regarding the details of the EU DPP. One is concerned with what data should be contained in the passport, another is discussing the topic of how to store, communicate and share the passport information, e.g., QR code, blockchain or de-centralized.
Compliance
A few things are clear, though: The EU DPP is about compliance; and it will be mandatory if you want to sell to the EU market in one of the targeted sectors.
The European Commission has proposed the introduction of DPPs under the Ecodesign for Sustainable Products Regulation (ESPR) to encourage a more circular economy and “make sustainable products the norm […] and ensure sustainable growth.”
Circular economy
The purpose is to help businesses and consumers make more informed choices by providing information about a product's origin, materials, manufacturing processes and other relevant details to create a map of the product lifecycle.
The overall intention of introducing DPPs is to make the environmental impact and lifecycle of a product transparent and provide guidance on how to reuse, repurpose and maintain the product.
In that sense, the passport is an element in the breaking away from the traditional linear value chain and a step towards a circular economy; and that first step is a mandate to deliver data.
The impact of this proposal is comparable with the GDPR from 2018 which continues to occupy data scientists, IT departments, legal officers and locally appointed data protection officers, as well as with the EU1169/2011 directive for labeling food aimed at providing more comprehensive information about the content and composition of food products.
The EU DPP is in a similar way going to affect the manufacturers’ relations with retailers and regulators, supply management and marketing, IT and data management.
The introduction of the passport will at first affect three key markets: 1) textiles, 2) batteries and, still undefined but possibly, 3) consumer electronics or packaging.
The digital recording of data relating to all aspects of the lifecycle of a product suggests the onus will be on the manufacturers who will need to collect large parts of the information and make it available to retailers so they can provide the passport information to consumers.
The environmental impact naturally comes from the supply chain which accumulates from multiple suppliers and their actions.
However, the DPP will also contain themes pertaining to the product’s afterlife, such as disposal, recyclability, recovery, refurbishment, remanufacturing, predictive maintenance and reuse.
A multidomain challenge
Clearly, the collection of sustainability data extends beyond mere product information and includes supplier, location, packaging and asset information as well. This is referred to as multidomain data management.
To create one product passport, you would need to collect certain party master data in order to be able to reference the supplier and the supplier’s location data.
Manufacturers who can govern and access all this information in a single platform, are therefore in an advantageous position to share it in a report or a passport.
For more information on the data management topic, check these resources:
The final details being still unknown, the EU DPP will center on the following themes:
(Source: COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS On making sustainable products the norm, chapter 2.)
To deliver this level of transparency requires data and insights that are not necessarily available to retailers and manufacturers.
Sustainability data needs to be collected and calculated. However, the circular economy is complicating the calculation of the environmental impact and multiplying the number of datapoints as recycled material has a longer and more complex product life.
A product can potentially consist of both first- and second-generation recycled material.
Because of the complexity of the circular economy, we are starting to see the emergence of 3rd party services and recognized reference data sources come together to provide industry-specific information around impact analysis calculations.
Other algorithms are starting to emerge to take this complex impact assessment data and simplify it into understandable and comparable metrics, for example the Eco-Score.
As already mentioned, the DPP is a record of the product’s lifecycle. But the data issue does not stop at products.
Key to the product passport vision is that product data is multi-dimensional, it can depend on manufacturing locations, suppliers and other such variables.
Manufacturing companies will need to revisit their supply chain management and how they govern supplier data.
With the digital passport roots based in manufacturing this is potentially a larger disruption to current practices than perhaps other verticals.
Data collection and governance are going to be a more prominent challenge for manufacturers.
Arguably, one could say that the Industry 4.0 mindset is what is needed to set you on the path to unlock many of the more complex themes in a DPP and specifically some of the lifecycle assessment (LCA) details encapsulated in the EU DPP specifications:
Lifecycle assessment is core to the EU product passport, and this is an area of great complexity. Many industry experts and industry bodies are working hard to define the systems behind the LCAs.
Furthermore, LCA may be required to be externally certified, which will to add to costs and execution timelines. All the more reason is there to apply good data governance disciplines to the collective data domains.
Customer relations
With the new set of data that allows manufacturers and retailers to demonstrate the sustainability and ethical sourcing of their products, manufacturers and retailers will be better equipped to meet the expectations of purposeful shoppers.
Consequentially, the passport can help establish trust and loyalty and thus hold potential of new revenue streams.
Regulator relations
The DPP will require compliance with a new, highly granular dataset. New datapoints will need to be included, disparate sets of information will need to be unified. Managing compliance will continue to sit with the chief data officers but they will probably need to staff up.
Supply chain management
DPPs can provide insight into the materials, methods and processes of product manufacturing, ensuring that products are manufactured and sourced responsibly. Enabling supply chain transparency is a big part of the passport initiative, which will eventually benefit all stakeholders.
Customers can make more informed decisions, retailers can onboard products and suppliers faster because they get better insight into supplier items, and regulators can more easily verify sustainability claims.
Marketing
Products have already for a long time been advertised for their sustainable qualities. In the future, the DPP will make it easier to evidence those qualities. The passport could be the beginning of the end of greenwashing by standardizing the way in which data is reported.
IT and data management
The DPP requires proper technological support as its success relies on the availability of accurate data.
IT leaders will need technology that can collect and manage sustainability data from many different sources and systems and make it easily sharable; and most importantly, it needs governance as sustainability data needs to be trustworthy.
Finally, there is an important time aspect that the technology needs to address. As a digital twin of the physical product, the DPP is immutable and needs to be accessible throughout the product’s life cycle which could be 20 years or more.
This will require a robust infrastructure that is able to survive several ownerships and technological changes.