All 27 EU Member States committed to turning the EU into the first climate neutral continent by 2050…
Make Europe greener and more digital
All 27 EU Member States committed to turning the EU into the first climate neutral continent by 2050. To get there, they pledged to reduce emissions by at least 55% by 2030, compared to 1990 levels. A circular economy (CE) is crucial to making the European economy greener and more resilient. It helps keep products and materials in use for as long as possible and reduces greenhouse gas emissions, pollution and waste.
One of the most significant challenges to achieving a CE is inadequate or even lacking information transfer between different stakeholders across value chains. An unexploited tool for addressing this challenge is digitalisation — namely, data and digital solutions –, as part of the broader green and digital transitions under the European Green Deal. The European Commission has begun to look at a greener Europe through the lens of the European Green Deal. At the same time, it is opening up discussions about the move to a more digital world: the digital transition.
The Digital Europe Programme will provide strategic funding to answer these challenges, supporting projects in five key capacity areas: in supercomputing, artificial intelligence (AI), cybersecurity, advanced digital skills, and ensuring a wide use of digital technologies across the economy and society, including through Digital Innovation Hubs.
1. Digital Product Passports (DPP)
A Digital Product Passport (DPP) is a method of digitally recording information about a product. The main purpose of this is to provide an easy to access, centralized bank of information. The DPP’s information will depend on the product. From manufacturers to the final consumer, DPPs offer solutions which can help everyone to lower their carbon footprint.
Increased Transparency for both Consumers and Businesses
There is a lack of transparency surrounding the materials used in our products. This is because information regarding a product’s material is not always easily accessible. With the introduction of the ‘Right to Repair’ Directive, information about repairing your electrical goods has become more readily available. However, there is currently no standardized method for recording these repairs. Recyclers further down the value chain may not know about these changes currently. This becomes an issue where these components have different grades of materials. This will make waste streams more efficient as recyclers can easily separate waste into the correct channels.
Centralized Information Flow at the product level
A Digital Product Passport would provide a one-stop shop for all of this information. This would benefit members of every stage of the supply chain.
Improved Sustainable Practices throughout a Product’s Lifecycle
Digital Product Passports would play a key role in a more circular economy. This is mainly due to the increased availability of information for every member of the supply chain:
- Recycled materials: Better reporting is key to improving the quality of recycled material used for future manufacturing. This would reduce the need for virgin raw materials. The material footprint of new products could be lowered by using recycled materials over virgin materials.
- Understanding your Carbon Footprint: Digital Product Passports could allow you to better understand your product’s material footprint. Sustainability is critical to our future. Therefore, being able to quantify our environmental impact is a key consideration for most businesses.
The product passport is an audit tool. If compliance with a regulation has to be audited, the digital product passport can provide information about the materials used and the conditions under which the product was manufactured.
With a digital product passport, audits can be standardized and reduced. It is possible to check electronically whether an audit has been carried out. To collect information across the entire supply chain, such as total collection and recycling rates, can also be read in real time. The European Commission also sees the digital product passport as a market research tool that can help to adapt regulations if necessary.
2. EU — Enhancing transparency & consumer information
Digital Product Passports can be valuable tools for enabling quick and convenient access to and sharing of product-related information. By scanning the tag (e.g. QR code), producers, consumers, waste operators and law enforcement agencies can easily access and possibly also upload relevant and targeted information for other stakeholders. This would come with multiple benefits. For example, easy access to information could empower consumers to purchase more circular products.
On 16 May 2022, IMCO (Committee on the Internal Market and Consumer Protection) held a public hearing on “Digital product passports: enhancing transparency and consumer information in the internal market”.
The aim of the hearing is to look into ways in which digitalisation, via the tool of product passports, can improve transparency and the availability of information on the characteristics of products sold in the EU, in particular for consumers and help transition towards a more resource-efficient single market. Digital product passports could provide information on a product’s compliance with EU rules, composition, origin of components, as well as repair and dismantling possibilities.
In addition to the two reasons (compliance & audit tool), there are potentially other positive side effects of the product passport:
– The product passport creates transparency. For all authorized actors in the supply chain as well as actors during and after consumption, the product passport provides transparency about resources used and the manufacturing process of the product.
– The product passport allows process automation for certain steps in the value chain, such as supplier onboarding, payment details verification, audit check, etc.
– The product passport provides information about consumer behavior and thus offers the potential to improve and optimise products accordingly. Even a privacy-law-compliant, anonymous direct contact with the end customer can be technically implemented, which enables upselling and direct customer service.
– If the product passport provides information about the CO2 footprint of a primary product, buyers can make better purchasing decisions and thus minimize their own footprint. The decision for low CO2 emissions and good recyclability can therefore already be made in the product design. The same applies to pollutants and the achievement of the zero-pollutant target.
– Movement data can also be part of the product passport. For example, reading the product location can prove that the product was sold in the country of destination.
– Finally, the product passport is a tool that can inform the end customer about all aspects of the product in order to support the purchase decision and the handling of the product.
3 Technical implementation of the Digital Product Passport (DPP)
Data analysis for the product passport
In order to implement a product passport for a product, the cooperation of the economic actors in the entire supply chain is necessary. For a successful product passport that fulfils the above-mentioned benefits, it is important that no product passport silos are formed, but that the entire industry participates in a common technical solution. Only a common, industry wide solution enables the desired network effects.
Technical structure of the product passport
The proposed concept for the design of the product passport is based on the natural emergence of data along the value chain. To fulfill all requirements, the following additional principles have been defined:
- Data responsibility of the originators: The actors in a value chain make statements about their product (or product batch). They make statements exclusively for the step for which they are responsible. For example, the raw material producer makes statements about the extracted raw material and the process of raw material extraction. The statements are recorded in a kind of data sheet and signed by the actor.
- Collection of data sheets: The product passport consists of the collected data sheets of all actors of a value chain, i.e. from raw materials production to the disposer. This collection corresponds to the “open dataspace” of a product passport mentioned in the new EU Battery Regulation.
- Decentralized storage: Actors can determine the storage location of their data sheets themselves. This creates a decentralized product data space, i.e. a product passport stored in distributed data stores. In other words, there is no system/actor that manages all information about the product centrally. The actors also determine the access rules of the data sheets.
- Verifiability of the data. The signature of the actors makes the data sheets verifiable. It is possible to identify the actors that issued the information; they cannot deny the information they provide about the product (non-repudiation). Additionally, the signature makes it possible to determine if the datasheet has been subsequently modified. The fact that the datasheets become verifiable through the digital signature creates a certain level of trust in the product passport and also in the data quality.
4. Challenges with the European Digital Product Passport (DPP)
Several challenges to introducing DPPs to the EU market remain. Finding a balance between information-sharing and protecting personal and corporate data is not easy. If convincing and applicable business cases for information transfer are lacking, corporate interest in DPPs is hampered. A lack of funds or skills may prevent small and medium-sized enterprises (SMEs), start-ups, waste operators and consumers from using DPPs. Policy interventions to facilitate the scale-up of DPPs can help address these challenges.
The 2020 Circular Economy Action Plan envisages that DPPs would inter alia be coupled with unique product identifiers (i.e. codes akin to a personal identification number) and data carriers (i.e. tags); include rights to access, introduce, modify or update the information; and be interoperable with other DPPs to enhance information transfer. The information in the DPP shall be based on open standards, interoperable, machine-readable, structured and searchable.
The balance between data sharing and data protection must be ensured, and the competitiveness of the EU’s industry not compromised. The right to access data must be clearly established in the delegated acts to distinguish between different companies, consumers, NGOs and public authorities. The EU should make the most of decentralised data-sharing solutions (e.g. blockchain) that allow companies to maintain control over their data. It should also support the development of cloud-based data solutions to allow companies (e.g. SMEs, start-ups) to pool their data together.
5. Sustainable Products Initiative (SPI)
The DPP has the potential to create new opportunities for circularity and make circular business models viable. It would enable buyers to better assess product sustainability performance and choose accordingly. It could also help identify which products pose a threat to our health and the environment (e.g. substances of concern, wasteful components or types of products), and incentivise their replacement.
The image below shows how a digital product passport takes center place in a circular economy, supporting all the major trends of such an economy — from sustainable recycling to sustainable manufacturing — by monitoring four key stages of a product’s lifecycle, from design to recycling and reuse.
The sustainability trends demand transparency in supply chains and access from all actors involved in the product’s life cycle. The DPP is a key enabler in this new situation of real-time updates and insights by all stakeholders, from producers and transport organizers to retailers and consumers.
The DPP creates a digital twin of the product to record the chain of lifecycle events (such as manufacturer data, ownership, duration of use, reuse, recycling, and so on) into the blockchain, which will influence how products are handled throughout the lifecycle. Each product data will be enrolled into the product’s digital passport, opening up the possibility for auditors to verify circularity claims. Nevertheless, the digital twin of a product can only be created if the product can be uniquely identified. Mass consumption products in the database have the same barcode, making it hard to trace the product on an item level. To resolve this issue, GS1 released new global specifications that enable the creation of unique identifiers for each product item and the standardized sharing of information about the physical product and its movement.
These standards represent the basis for the creation of a new generation of supply chains, which are transparent and trusted and provide additional value to all stakeholders, from manufacturers to consumers, and again for reuse. Furthermore, item-level identification can serve as a disruptive innovation, launching new business models for the circular economy.