Advancing Towards the Digital Product Passport
What Requirements Does the Digital Product Passport Impose on Companies?
By January 2030, manufacturers of products such as chemicals, plastics, paints/varnishes, cosmetics and pharmaceuticals are required to exchange data within the framework of the Digital Product Passport (DPP). This concerns not only the products themselves but also their packaging, including plastic, paper, cardboard, glass and metal.
The EU regulation DPP focuses on transparency to make the environmental impacts and origins of products accessible to everyone, thereby promoting the Circular Economy.
This is achieved through a digital document that can be accessed via a QR code on the product and contains all relevant information:
- Manufacturer & Origin
- Materials
- Properties (physical, chemical and biological)
- Composition (names & quantities of raw materials/chemicals used)
- Repairability and Recyclability (ability to be broken down into its original components/resources)
- Environmental Impact (soil, water, air)
DPP Fundamentals
A key feature of the DPP is the unique product identification through a serial number. This not only allows for the storage of product-specific data but also enables precise retrieval of that data. This is particularly important to ensure clear identification even for identical products with varying remaining loads or conditions.
Companies with little experience in Circular Economy or those that have neglected digitalization face a particular challenge. Data governance plays a central role, as it ensures the management of data throughout its entire lifecycle— from collection to use to disposal. In today’s world, comprehensive data governance is essential to ensure data quality, data integrity and data security.
Article 10 of the EU Eco-Design Regulation currently specifies the following requirements for the data:
- Full interoperability for seamless collaboration between different systems.
- Free access to the product passport for consumers, economic operators and other relevant actors based on their access rights as outlined in the delegated acts.
- Secure data storage and processing: Verification of the authenticity, reliability and integrity of the data.
Employing appropriate systems is crucial to meet the demands of digitalization, data security and privacy. The rule is always: more automation, more efficiency. Automation helps not only to avoid errors but also to minimize the workload and ongoing costs.
Implementation and Deadlines of the DPP
The first phase of the DPP began on January 1, 2023, making compliance with the Digital Product Passport mandatory for electrical and electronic equipment. Phase 2 will commence on January 1, 2026, expanding the DPP to additional product categories. By 2027, industries will be further defined according to the Circular Economy Action Plan (CEAP) and regulations will be introduced for specific product groups.
A core aspect of the program is to provide comprehensive sustainability information that companies can use in various ways, such as for product development, marketing, or corporate management. To generate this sustainability information, companies are encouraged to collect data throughout their supply chain. Suppliers, manufacturers, and other stakeholders can contribute crucial information. Data collection is supported using a track-and-trace system, which allows companies to monitor product movements within the supply chain. This not only facilitates data collection but also enhances transparency across the entire supply chain.
For instance, companies can identify and report defective batches promptly, helping to protect the company’s reputation.
DPP: Benefits at a Glance
The introduction of the DPP offers numerous advantages for both companies and consumers:
For Companies:
- Enhanced Sustainability: Transparency throughout the entire product lifecycle.
- Competitive Advantage: Increased trust and customer loyalty through sustainability information and verified use of high-quality raw materials.
- Improved Efficiency: Optimization of repair and disposal processes.
- New Business Opportunities: Development of recycling and circular economy solutions.
For Consumers:
- Increased Transparency: Better-informed purchasing decisions due to product transparency.
- Support for Sustainable Consumption Choices: Contribution to environmental protection.
- Enhanced Safety: Reduction in the risk of product counterfeiting.
Particularly in the fields of chemicals and packaging technology, the DPP opens up new avenues for recycling and repurposing products. These approaches not only boost the innovation potential of companies but also positively impact overall sustainability performance. Enhanced ecological performance makes companies more attractive by presenting compelling sustainability credentials to customers, which in turn facilitates the acquisition of new customers and business opportunities.
ESG Data Management and Product Tracking
When capturing Environmental, Social and Governance (ESG) data from supply chains and manufacturing processes, it is crucial to use an appropriate software solution that can both manage and track this data (Track & Trace). The solution enables comprehensive assessment of direct, acquired and indirect emissions resulting from corporate actions, value chains and products. The processes are aligned with global standards for carbon reporting as well as industry-specific best practices.
The collected data can be shared through a data exchange mechanism within a business network. This network allows for the request of information regarding the Product Carbon Footprint (PCF) and facilitates data exchange with trading partners within the network. This promotes verified communication and interoperability with standardized data models.
To ensure precise data attribution to a specific product, it is recommended to use a solution based on Track & Trace expertise. This solution provides various integration options with external software through Application Programming Interfaces (APIs). It generates a unique identifier that references the product (serialization) and enables comprehensive documentation through the recording of events and additional data such as quality checks and certificates, all specific to this product. This allows for accurate tracking of materials, batches, components and/or assemblies used in the production of a particular product. The Track & Trace history is further detailed, while the generated ESG data can be effortlessly retrieved using the product number.
An additional advantage of standardized interfaces and APIs is the seamless integration of solutions into existing IT landscapes. Easy incorporation and integration into the architecture avoids the creation of duplicate data structures, significantly simplifying data management and thereby reducing overall costs.
Consequences and Success Factors
Non-compliance with the DPP can lead to significant financial consequences, as detailed in Regulation (EU) 2022/920 of the European Commission:
- Intentional Violations: Fines up to €10 million or up to 0.5% of the company’s global annual revenue, whichever is higher.
- Negligent Violations: Fines up to €5 million or up to 0.2% of the company’s global annual revenue, whichever is higher.
It is crucial to take timely action and not postpone the matter. The DPP is being implemented and companies must be prepared. Otherwise, they risk not only financial losses but also limited operational flexibility.
Regardless of the chosen systems, the initial step is critical. Procrastination carries risks, and preparations should begin early. Future scalability should also be considered when selecting solutions. Although Excel may serve as a temporary tool, it quickly reaches its limits and is prone to errors. Digitalization projects of this nature typically require at least a year to seamlessly integrate all processes into the existing IT landscape.
Starting early and considering future requirements are essential. Advice and support from experienced partners are invaluable for avoiding mistakes and ensuring project success. A strong partner with expertise in digitalization and Track & Trace is highly recommended to effectively meet the DPP requirements.
Opportunity for Sustainability and Digitalization
What may initially seem like an additional burden is an opportunity to further digitalize processes and link data to fully realize potential. For example, complying with the Battery Passport not only facilitates the introduction and marketing of batteries under the new EU regulation but also generates a significant amount of data that can be meaningfully analyzed and utilized.
The collected real-time data allows for the simulation of various scenarios, optimizing decision-making processes. From choosing locations for additional manufacturing and managing warehouses to optimizing global supply routes and adapting to disasters or market fluctuations— the range of applications is diverse and can be viewed both locally and globally.
It is crucial to understand that many digitalization initiatives are currently underway, such as Gaia-X, Catena-X, Manufacturing-X, Battery Passport and DPP. In the future, having well-accessible data will be essential to remain competitive. Choosing the right software and consulting partner is critical to assist companies in identifying, implementing, and servicing suitable solutions— both locally and globally.
Orginally posted on neue verpackung, April 2024
