Business leaders are increasingly recognizing the importance of sustainable practices and transparent data in decision-making. However, the presence of data gaps and silos within supply chains makes it challenging to determine the environmental impact of products.
The Digital Product Passport (DPP), introduced by the EU's new Ecodesign for Sustainable Products Regulation (ESPR)1 serves as a tool for enhancing transparency and promoting circularity. These benefits are accomplished by sharing comprehensive product information throughout the entire value chain. DPP promotes product repair and recycling and enhances transparency on environmental lifecycle impacts. It also strives to establish sustainable and circular products2 as the standard in the EU market.
This new method of digitally recording and sharing product information related to environmental sustainability factors requires a transformation for companies worldwide selling products in the EU. Going forward, organizations will have to integrate DPPs into their overarching Environmental, Social and Governance (ESG) framework.
To help you formulate a proactive strategy, consider the following five crucial insights for effectively handling DPPs.
Strategizing the Digital Product Passport for ESG Impact
1. What Is the DPP?
The Digital Product Passport serves as a dynamic digital dossier that captures a product's entire lifecycle – including conception, design, manufacturing and distribution – making it accessible in the form of a 'digital twin'.
It acts as a digital method for recording and sharing comprehensive information about a product and its components, promoting transparency, traceability and sustainability throughout the supply chain.
Contributing to the circular economy, DPPs provide crucial details on the environmental sustainability of products, empowering stakeholders such as OEMs, regulators and consumers with information for repairing, recycling and reporting on product usage and impacts.
DPP requires that you submit unique product identifiers; however, your organization can utilize existing technologies like barcodes, QR codes, RFID tags or similar.
For example, a consumer scanning a QR code incorporated into a smartphone’s label would be promptly redirected and connected to the associated DPP. This passport would provide comprehensive information about the product's sustainability features, including details on sourcing, material composition, manufacturing processes, repair and disassembly options as well as guidelines for recycling the various components.
2. What Are the Goals of the DPP?
The DPP is designed to assist both consumers and businesses in making well-informed decisions when acquiring products.
It aims to streamline processes related to repairs and recycling, enhancing transparency regarding the environmental impacts throughout a product's life cycle.
Additionally, the product passport is expected to aid public authorities in conducting more effective checks and controls by providing reliable information in real-time.
3. Who Should Care About the DPP?
If your organization produces textiles, electronics, construction products, batteries, etc., that are sold in the EU, DPP applies to you. The rules proposed to ESPR apply to all products placed on the EU market, regardless of where they are produced. There are some exempt industries, such as food, feed and medical products, which have different regulations.
The DPP will become mandatory for approximately 30 categories with an anticipated implementation timeline beginning in 2026. The start date depends on final approval, which is expected in 2024.
Following approval, batteries will be the first product category mandated to adhere to DPP regulations. This is expected to occur in 2026. Subsequently, apparel and consumer electronics will be required to comply shortly thereafter.
4. What Does the DPP Mean for Your Business?
Implementing the product passport will involve collecting, managing and sharing pertinent information, such as product data and supply chain details.
The framework has established diverse requirements, encompassing product durability, reusability, upgradability, reparability, substances affecting circularity, energy and resource efficiency, recycled content, remanufacturing, recycling, carbon and environmental footprints.
The type of information captured depends on your product. For instance, the DPP for consumer electronics details materials, repairs and recycling data, while the DPP for packaging highlights the percentage of recycled material but doesn’t include repair information.
Key Components of a DPP
- Product identity and history: DPPs utilize unique identifiers, enabling stakeholders to trace your product back to its origin. This feature ensures authenticity and helps combat counterfeit products.
- Supply chain visibility: With real-time tracking, a product passport provides a clear view of your product's journey through the supply chain. This transparency is crucial for identifying inefficiencies, reducing risks and ensuring compliance with ethical and environmental standards.
- Lifecycle information: From design specifications to maintenance guidelines, a DPP captures the entire lifecycle of your product. This wealth of information empowers your business to make informed decisions, optimize processes and enhance overall product quality.
5. What Is the Role of Master Data in the DPP Ecosystem?
Manufacturers and suppliers are sharing product information in different ways for DPPs. However, many companies seeking to create DPPs are challenged by a lack visibility into their supply chains. To scale this effort and ensure profitability, it's vital for all organizations in the supply chain to collaborate and share necessary information efficiently.
Master Data Management’s Vital Role
This is where the management of master data is key, as data relevant to a product's sustainability is often scattered across various business systems, impeding transparency and efficient reporting. To establish a robust DPP framework, your organization’s chief data officer (CDO) and chief sustainability officer (CSO) must consolidate this data into a central repository, ensuring governance through de-duplication, data quality control and workflow automation.
To create effective DPPs, it's important to fully understand your product's lifecycle. This means your organization must be able to easily track information across the supply chain. To do so, you require systems that can gather and organize different types of data, such as sustainability details about your product, including data about your organization, its location and the materials used in manufacture. These systems must also keep up with changes in DPP standards. To stay compliant, your organization must collect important data and share it safely with the right people in your supply chain, with a focus on product improvement initiatives and minimizing environmental impact.
A Product Information Management (PIM) system with embedded data governance can serve as cornerstone in the DPP ecosystem. It ensures the reliability of standardized information crucial for DPPs, enabling your organization, your consumers and other businesses to obtain accessible details and in-depth insights into product materials. PIM systems also play a pivotal role in integrating DPPs seamlessly with various systems across your supply chain, enhancing interoperability with your enterprise resource planning, product lifecycle management, master data management (MDM) and other platforms. This flexibility allows your business to adapt to changes in attributes, regulations and market demands, ensuring scalability and agility.
Despite the capabilities of a PIM system, the diversity of data domains underlines the need for a platform that can manage relationships and intricate hierarchies. A standard PIM solution may fall short of meeting the full requirements for DPPs, particularly regarding the storage of supplier information alongside your product data, locations and materials information. It’s recommended to augment your approach with a multidomain MDM solution, which provides clean, accurate data across domains. This empowers your CDOs and CSOs to manage all data relationships and complex hierarchies essential for DPPs.
Integrating DPPs into your company's primary ESG framework is not just a forward-thinking move; it's becoming an imminent necessity. Although not mandatory at present, the impending mandate for DPPs is approaching rapidly. Now is the opportune moment for your organization to proactively outline a comprehensive data strategy and begin identifying solutions that facilitate the seamless collection, management and sharing of data crucial for compliance with DPPs. By embracing this proactive approach, your organization can stay ahead of regulatory developments and align with sustainable and responsible business practices in the digital era.
To learn more, check out the resources below:
- Learn how to supercharge your ESG data strategy with comprehensive, intelligent master data management.
- Achieve your goals for a sustainable future with help from our ESG resources.
- Contact our ESG department.
2In a circular economy, the goal is to minimize waste and make the most of resources by promoting sustainability and reuse. Circular products are characterized by their design, materials, and life cycle, which are intended to maximize longevity, reduce environmental impact, and facilitate the recovery and recycling of materials.