The Digital Product Passport and its background

A Digital Product Passport (DPP) is a tool for collecting and sharing product data during its entire lifecycle, showcasing its sustainable, environmental, and recyclable features. Data on the product, including its origin of raw materials and production methods, is gathered in the DPP and shared among various stakeholders and participants. This sharing provides benefits, use-cases and value across entire ecosystems.

While the idea of tracking products from creation to disposal isn't a new one, the use of blockchain technology to document and securely encrypt product information via a Digital Product Passport represents a growing trend in business adoption. This approach notably focuses on user-friendliness, offering benefits and value to consumers that are on par with those for businesses, a balance not typically found in other methods.

Currently, the application of Digital Product Passports is primarily within the realms of sustainability, recyclability, and environmental efforts, aligning with the principles of the circular economy. However, it's important to recognize that the concept and technology behind Digital Product Passports are still in the early stages of development and have the potential to expand in utility. This guide will explore various additional applications beyond the current primary focus, highlighting a range of possibilities that businesses can explore to benefit both their operations and their customers.

Central to the ongoing conversation about Digital Product Passports is the focus on circular economy and sustainability. The initiative for a circular economy aims to revolutionize how we produce, consume, and utilize products and resources, with the goal of significantly reducing waste and enhancing the longevity of both resources and products.

This effort is part of a larger commitment towards making the global community and its inhabitants more sustainable, encouraging all involved parties to maximize the utilization and recycling of precious resources and materials. In this circular economy model, valuable resources are preserved and not wasted, thanks to innovative methods of sharing, repairing, reusing, and recycling.

In line with various European Union legislative actions and initiatives, numerous sectors have been identified as frontrunners in the adoption of Digital Product Passports, including industries such as batteries and vehicles, textiles, electronics and ICT, furniture, plastics, construction, and chemicals. While the definitive timeline is yet to be finalized, the year 2026 is marked as the starting point for the first industry (batteries) to implement DPPs, with the expectation that other industries will gradually adopt them by 2030.

A long-term plan to  to reach net zero emissions by 2050

The drive for businesses to adopt Digital Product Passports goes beyond just innovative thinking. In Europe, a comprehensive set of policies and regulations, either proposed or already in effect, have been established by the European Union, primarily under the European Green Deal (EGD). This initiative aims to lead Europe towards achieving net-zero emissions by 2050.

A key element of the EGD is the Circular Economy Action Plan (CEAP), which was activated in March 2020 and is closely linked to the application of Digital Product Passports at the EU governmental level. The CEAP outlines the strategy for a European circular economy and sets several important objectives, such as ensuring product sustainability, reducing waste, and enabling consumers to make more educated choices regarding their purchases. Additionally, under the CEAP and related initiatives, certain industries have been identified to be the first to comply with new EU-wide regulations, aiding the European Union, and consequently the entire continent, in meeting its sustainability objectives.

To give a clearer picture of the EU-level policies currently being suggested or enacted in relation to product sustainability and Digital Product Passports, the following are some of the significant items that are largely encompassed within the broader framework of the Circular Economy Action Plan (CEAP).

• Ecodesign for Sustainable Products Regulation (ESPR): In the proposal phase as of March 2022, the ESPR is a central component of the CEAP. This proposed regulation aims to enhance the circularity, energy efficiency, and environmental sustainability of products. It plans to establish criteria and benchmarks for aspects like product longevity, reusability, resource efficiency, and carbon emissions. A Digital Product Passport solution is proposed as the primary tool for recording and disseminating this information, offering stakeholders comprehensive insights into the sustainability features of products.

• EU Strategy for Sustainable and Circular Textiles: Active since March 2022, this strategy is another crucial aspect of the CEAP. It focuses on increasing the circularity of textiles used in various products, such as clothing, building materials, and vehicle interiors. The primary objectives are to extend the lifespan and durability of textiles and facilitate easier repair and recycling processes. This legislation heavily involves consumers and end-users, allowing them to validate the environmental claims of textile manufacturers. Digital Product Passports are set to be the main facilitator in achieving these goals according to this regulation.

• Construction Products Regulation (CPR): Also in effect from March 2022, the CPR is a significant part of the CEAP. It ensures that construction products throughout Europe meet specific safety and environmental standards. The implementation of Digital Product Passports is supported by this regulation, enhancing compliance and transparency in the construction sector.

• (New) EU Battery Regulation: Proposed in December 2020 and forming part of the CEAP, this regulation aims to ensure the sustainability and safety of batteries within the EU, emphasizing high recyclability. Its enactment is anticipated in the coming years, with 2026/7 marked as the start date for its application in the industrial and electric vehicle battery sectors. Digital Product Passports, or Battery Passports, are identified as the key instrument to facilitate this regulation, ensuring compliance and sustainability in the battery industry.

DIGITAL PASSPORT

A Digital Product Passport effectively establishes a digital twin of a physical product, meticulously documenting a range of data including events, transactions, and sustainability aspects throughout the product's entire lifecycle.

This digital counterpart is typically linked to the physical product through methods like QR codes, barcodes, or NFC tags, making the Digital Product Passport accessible through applications on smart devices or similar platforms. For instance, a user could scan a QR code on a garment's label to access its Digital Product Passport, which would provide information on the garment's environmental impact, ownership history, and recycling instructions.

Presently, the legislation and application of Digital Product Passports primarily concentrate on gathering comprehensive data across the product's lifecycle to offer an in-depth understanding of its sustainability, potential for recycling, and compatibility with circular economy principles. However, the scope of these passports is not confined to this, as diversifying the data types collected broadens the range of potential uses and opportunities.

This means that the application of the digital twin model and Digital Product Passport technology extends beyond specific sectors like textiles and batteries, which are the focus at the EU level. It is adaptable across various business sectors, allowing for experimentation and adoption to enhance long-term value for both businesses and customers.

Indeed, numerous industries are already advancing beyond traditional practices by implementing Digital Product Passport technology. This adoption is opening up new possibilities in areas such as transparency, traceability, and the exchangeability of products and information.

DATA COLLECTION

Adopting a comprehensive perspective on Digital Product Passports reveals their ability to gather and distribute a wide range of data across various ecosystems and supply chains. Different categories of information can be collected:

• General Information: This category includes essential product details like product ID, batch numbers, reference numbers, weight or volume, manufacturing location and dates, and manufacturer operator ID, among others. This data is crucial for consumers to confirm the product's authenticity and avoid counterfeit items.

• Source Details: This pertains to the type and source of raw materials and components used in the product's creation. It encompasses information about chemicals, plastics, ingredients, and substances used, including materials that have been recycled or recovered. Additionally, it covers the sustainability of the manufacturing process and adherence to ethical standards, enabling consumers to verify the environmental claims of the products they buy.

• Repair History: This includes information on the product's repairability and specific repair events throughout its lifespan. It covers where and by whom repairs were performed, the nature and cost of repairs, and additional context about why repairs were necessary. For example, a luxury watch owner might have all repair details of their watch stored in the digital passport.

• Environmental Footprint: Data in this category helps consumers understand the carbon footprint and CO2 emissions associated with the product's manufacturing, usage, and lifecycle. It may recontextualize information from other categories, such as energy consumption during production and emissions to air or water, highlighting the use of recyclable materials in the product. The Digital Product Passport thus provides a comprehensive view of the product’s environmental impact.

• Warranty Information: Digital versions of warranty, service, insurance, and guarantee documents are securely stored in the digital passport. This includes expiry dates and data on any repurchase agreements, allowing end-users to validate their coverage claims. For instance, a car owner might use the digital passport to confirm a free service package they previously purchased, streamlining interactions with the service department.

• Ownership Records: This section documents past and current owners of a product, with detailed timelines and a record of ownership changes. It can be customized for different use cases, such as tracking the resale of clothing or luxury goods, with ownership transfers facilitated through the digital passport.

• Usage Instructions: The Digital Product Passport stores detailed instructions on various aspects, including disassembly, recycling, proper usage, operation, end-of-life disposal, repairs, and maintenance. It also includes guidelines for reusing and remanufacturing the product.

Overall, these diverse data categories enhance the utility of Digital Product Passports, offering valuable insights to stakeholders throughout the product’s lifecycle.

As mentioned earlier, the technology behind Digital Product Passports is still in its developmental stages, with the range of applications expanding in line with the diversity of data being gathered. Digital Product Passports are designed to provide a comprehensive audit trail of a product’s entire lifecycle, benefiting various stakeholders such as manufacturers, consumers, resellers, and recycling agencies.

Currently, the primary focus of Digital Product Passports is on aspects like sustainability, the ability to repair, and the recyclability of products, all of which contribute to the wider concept of a product's circularity. However, as more companies explore and realize the full capabilities of this technology, the range of applications and opportunities for Digital Product Passports is expected to grow significantly.

DATA CARRIER

Data carriers are the tools that allow users to access the Digital Product Passport linked to a specific product. Current European Union guidelines indicate that organizations have the flexibility to choose their preferred data carriers for individual, batched, or specific types of products. Suitable data carrier options for Digital Product Passports encompass:

• QR Code: Widely used in various sectors for numerous purposes, QR codes are a popular choice as data carriers. They are known for their robustness and adaptability, with the added advantage of easy compatibility with smart devices, making them highly accessible.

• Barcode: Barcodes are another option, similar to QR codes, but they are somewhat more limited in their functionality. Their primary role is to store basic product information and they don't typically serve as a link between the user and additional online content, such as a webpage hosting the Digital Product Passport.

• NFC (Near Field Communication): Commonly employed in contactless payment systems, NFC tags are akin to QR codes in terms of accessibility via most contemporary smart devices. However, NFC tags are unique in that they are independent hardware components (like stickers with embedded antennas and microchips), which may involve extra costs. A significant advantage of NFC over QR codes and barcodes is the ability to embed them within products, offering enhanced security features by not being externally visible.

Why Blockchain?

Blockchain technology serves as an ideal base for developing a Digital Product Passport system for various reasons:

• Data Security: Employing a consensus mechanism for data verification and robust encryption, blockchain significantly reduces the risk of data tampering and fraud. Its decentralized nature further enhances data security by eliminating central points of failure.

• Immutability: Blockchain functions as a permanent digital ledger, instilling a high level of confidence in its data. The consensus-based validation ensures the data remains accurate and protected from unauthorized alterations.

• Transparency: Every transaction on the blockchain is verifiable, trackable, and searchable, ensuring full transparency for everyone involved in the ecosystem regarding the information stored in Digital Product Passports.

• Efficiency: Blockchain technology facilitates swift processing, exchange, and verification of data. The use of smart contracts streamlines various processes, reducing dependency on intermediaries and third parties, thereby enhancing efficiency and data accuracy.

• Decentralization: Being decentralized, blockchain systems are resistant to censorship and generally less susceptible to vulnerabilities compared to traditional technologies reliant on centralized servers.

The Value of Digital Product Passports

Digital Product Passports have a wide-reaching impact and engage various stakeholders across different value chains and industries. The advantages and value they offer extend to a diverse group, including organizations, consumers, policymakers, and recycling entities, ensuring that digital passports yield benefits for everyone involved.

Benefits to Businesses and Organisations

• Emergence of New Business Models: The shift towards a circular economy, emphasizing product durability, opens up a range of new business possibilities, like offering products as a service. These opportunities can lead to additional revenue and growth for companies. Embracing circularity can also introduce new repair and service functions, enhancing customer relationships. Digital passports act as a novel avenue for marketing, sales, and operations teams to provide innovative services and enrich the customer experience.

• Enhancing Consumer Trust: Documenting the entire lifecycle of products, from manufacture to recycling or disposal, businesses can provide consumers with a transparent view of the product's authenticity and condition. With 46% of consumers seeking clarity on product origins, this transparency boosts consumer confidence and loyalty.

• Verification of Environmental Claims: In an era where greenwashing is a concern, digital passports authenticate and secure sustainability claims using immutable blockchain technology. This is vital, considering 53% of consumers struggle to identify false environmental claims. It allows businesses to refine their sustainability strategies and establish themselves as leaders in environmental responsibility.

• Protection for Consumers: By ensuring compliance with standards in raw materials and manufacturing processes, businesses can safeguard their customers from illegitimate or unsafe products. This also serves to protect the brand from potential public relations issues, like recalls or incidents stemming from product flaws.

• Assuring Compliance: In the context of complex and challenging-to-monitor supply chains, digital passports provide a unified and accessible source of truth. This enables businesses to effectively track and maintain their compliance and sustainability efforts in real time.

Benefits to Consumers and End-Users

• Enhanced Buyer Confidence: Digital passports empower consumers to make better-informed decisions regarding the environmental practices of the brands they patronize. As the preference for eco-friendly brands grows among consumers, digital passports become an essential tool, especially given that 33% of consumers have ceased buying from brands due to sustainability issues. With detailed information about a product's lifecycle available, buyers' trust in the authenticity and history of their purchases is likely to increase.

• Increased Product Value: Echoing the previous point, digital passports assure consumers of the genuineness of their products, steering them clear of defective or counterfeit items. This assurance is particularly valuable in the growing second-hand market, where proving a product's authenticity is key to maintaining its value.

• Detection of Greenwashing: Digital passports effectively help consumers spot greenwashing and authenticate environmental claims made by companies. The immutable and transparent nature of blockchain technology allows consumers to discern truthful claims from misleading ones. An example is the case of H&M facing legal action over potentially misleading eco-friendly apparel claims. Digital passports enable consumers to independently verify such claims.

• Awareness of Carbon Footprint: Many consumers, aiming to be more environmentally responsible, are keen to understand and reduce their carbon footprint. Digital passports can provide precise data on a product’s energy consumption and environmental impact. For instance, through blockchain-enabled tokenization, retailers could incentivize customers to recycle products by offering 'sustainability tokens', redeemable for rewards or perks, thus motivating consumers to participate actively in circular economy initiatives.

Benefits to Policy Makers and Governing Bodies

• Ensuring Compliance: Utilizing the Digital Product Passport (DPP) system, policymakers, including the European Union and its member states, can effectively locate, assess, and measure how well businesses adhere to sustainability initiatives. Essentially, DPPs offer a consolidated platform for monitoring the environmental performance of companies and organizations, allowing policymakers to set and evaluate key performance indicators (KPIs) and take appropriate actions when necessary.

• Promoting Sustainability: The establishment of a permanent, unchangeable record for sustainability data within the DPP framework compels businesses and organizations to adhere to environmental guidelines. This transparency in their environmental practices, particularly visible through the digital passport system, significantly diminishes the incidence of greenwashing and misleading claims. This transparency aids policymakers in more effectively achieving their objectives regarding sustainability, resource efficiency, and the advancement of a circular economy.

The Impact of Digital Product Passports

This guide has outlined the primary factors and distinct elements of Digital Product Passports. While their current use is primarily centered on demonstrating sustainability and facilitating circular economy efforts, there exists a variety of additional applications and possibilities that could emerge as the scope of digital passports broadens.

Digital Product Passport Use-Cases and Opportunities

• Facilitating Circular Economy: Digital Product Passports create a secure digital version of a physical product. This digital twin, a distinct digital representation of each product, securely stores and makes accessible data about the product's lifecycle, ownership, and origin to businesses, policymakers, and customers. Unlike tangible certificates, digital twins are immune to forgery, replication, damage, or destruction. Continual updates to the digital passport provide a complete record of the product's circularity.

• Verifying Sustainability: Digital passports empower businesses to track the origins of their products and validate their sustainability. Information about the source of raw materials, manufacturing processes, and batch specifics are securely recorded on a blockchain, ensuring data integrity and immutability. This transparency allows companies to demonstrate their commitment to sustainable practices to auditors, regulators, and consumers.

• Detecting Counterfeits: With a digital passport, the authenticity of a product can be reliably confirmed. In industries like fashion, where counterfeiting is prevalent, digital passports efficiently verify both the authenticity and ownership of products, safeguarding personal details of the owner. This feature enables both brands and consumers to effectively tackle the counterfeit market.

• Verification in Resale Markets: As the resale sector grows, the need for quick and accurate product authentication becomes crucial. Digital passports not only allow customers to confirm the genuineness of products before ownership transfer but also help brands explore new revenue opportunities in the thriving resale market.

• Enhancing Customer Experience and Education: Digital passports serve as an interactive platform between businesses and their customers. They enable the provision of additional services like priority repairs and customer support, and educate consumers about sustainability. Businesses can further engage customers by using blockchain tokenization to encourage and reward sustainable actions, thereby boosting customer loyalty and retention.

NEXT STEP

It is evident that sustainability and circular economy practices have transcended from being mere desirable attributes to becoming essential strategic focuses for organizations, brands, and consumers alike. At the policy-making level, entities like the European Union are actively developing legislation that positions Digital Product Passports as crucial facilitators of the circular economy.

For stakeholders in industries such as textiles, electronics, batteries, and construction, the adoption of Digital Product Passports is swiftly moving from optional to mandatory. Now presents an opportune moment for these stakeholders to start delving into and experimenting with this technology. Early adoption not only provides a competitive edge but also allows ample time for aligning the entire value chain and stakeholder network with the impending legislative requirements.

How enCaps can help?

At enCaps, we are experts in DPP and circular economy. Through our consulting and development services we can help you build and deliver your Digital Product Passport solution to support your broader sustainability and circular strategy.

Contact us now to discover more and book a call with our experts: https://encaps.io/contact