Author
Rithika Thomas, Industry Analyst
A Digital Product Passport (DPP) will be mandatory for some products shipped to and within the European Union (EU) as early as 2026 as part of the EU’s European Green Deal (EGD) and Circular Economy Action Plan (CEAP). Eventually, nearly all products entering EU nations will require a DPP, affecting local and international businesses in numerous industries. A DPP will forever transform how physical goods are tracked through the supply chain, providing sustainability-related information via data carriers like QR codes.
As the European continent pushes for net-zero emissions by 2050, the role of DPPs is paramount. They measure a product's environmental and safety impact, providing a clear path for businesses to align with their green goals. This level of supply chain transparency not only supports a business’ sustainability efforts, but also has the potential to win over the hearts and minds of eco-conscious consumers by preventing greenwashing.
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What Is a Digital Product Passport?
A Digital Product Passport (DPP) is a digital twin of a physical product that gathers various sustainability and operational data as the product moves through different stages of the supply chain, from cradle to grave/end of life. Each supply chain partner involved in the process contributes product-level information, making the DPP a centralized data repository of vital product information that enhances transparency and coordination.
When DPPs are implemented for EU commerce, they will uncover a wealth of information about a product’s lifecycle, from its composition and material sourcing to its manufacturing and end-of-life recycling options. This comprehensive dataset, all in one centralized platform, is not just informative but empowering. It allows companies to identify where supply chain hotspots and inefficiencies exist and how to reduce Greenhouse Gas (GHG) emissions, motivating them to take action and contribute to a more sustainable future. Moreover, as the global economy’s circularity continues to shrink, businesses must improve the reuse of their products.
The EU has deemed the following industries as high priorities for DPP implementation based on their environmental impact:
- Batteries & vehicles
- Chemicals
- Construction & buildings
- Electronics & Information and Communications Technology (ICT)
- Furniture
- Plastics
- Textiles
Figure 1: Potential for Digital Product Passports to Solve Global Challenges
(Sources: World Business Council for Sustainable Development and the Boston Consulting Group)
In the short video below, I discuss some background information on digital product passports.
EU Regulations Require Product Circularity
Several EU regulations supporting the EGD and CEAP policies are driving the implementation of DPPs for improved circularity.
- Ecodesign for Sustainable Products Regulation (ESPR): Published in 2022, ESPR is the main catalyst for DPPs. ESPR aims to promote a circular economy, improve energy efficiency, make products more durable, and encourage recyclability. According to the European Commission, ESPR will provide energy savings almost equal to the amount of natural gas imported from Russia to the EU by 2030.
- EU Strategy for Sustainable and Circular Textiles: With 5 million tons of clothing junked each year, this regulation aims to improve the longevity and durability of textile products. DPPs will be essential for substantiating a company’s green claims.
- Construction Products Regulation (CRP): This regulation will require a digital product passport for all construction products and materials in the EU. The DPP will enable architects, engineers, and construction companies to make better decisions by accessing various environmental and safety information about a manufacturer’s construction products.
- (New) EU Battery Regulation: Starting on February 18, 2027, Light Means of Transport (LMT), Electric Vehicle (EV), and industrial batteries with a 2 Kilowatt-Hour (kWh) or greater capacity must be electronically registered with a digital product passport. Recycling operators and consumers can access the DPP with a QR code, revealing important information like battery state of health and handling instructions. The new EU battery regulation also asserts that portable batteries must be easily removed and replaced. This will extend the product life span and improve the reuse/recyclability of batteries. EV battery passports will make the global supply chain cleaner and more resilient.
Each of these regulations shares the necessity of a central framework with open access that distributes data across the supply chain. The DPP is seen as the main tool for making this happen. It’s also important to note that companies based outside the EU must comply with DPP mandates if they wish to continue selling to consumers in EU countries.
Further Reading
Top Digital Product Passport (DPP) Software Providers for Supply Chain Operators
Selecting the Right Digital Product Passport (DPP) Solution Provider for Your Supply Chain (CA-1489)
How Digital Product Passports Provide Value
One of the biggest benefits of DPPs is that they elevate a company’s brand reputation. Investors and consumers alike increasingly demand sustainable business practices. For example, recent survey results show that about 6 in 10 European shoppers say it’s important for fashion brands to be transparent about their manufacturing practices and source materials ethically/sustainably. Therefore, if your company wants to back up its sustainability or Environmental, Sustainability, and Governance (ESG) aspirations, a DPP is a must-have tool.
From ethical/sustainable material sourcing to end-of-life recycling, a DPP opens a window into every aspect of a physical product’s environmental and safety impact. This allows stakeholders to assess whether or not a company is doing its part to minimize carbon emissions and waste across its value chain. Moreover, the DPP's data are essential for enterprises to prove to regulators that they adhere to ESG mandates. Early examples from Tesla, Audi, and Burton Snowboards have already demonstrated the value of DPPs.
Figure 2: Benefits of Digital Product Passports
(Source: ABI Research)
Digital product passports build trust with consumers through information sharing. For example, a DPP lets a retail customer know what kind of resource consumption was involved in developing a product. Or the digital passport might inform the customer of the working conditions at the manufacturing facility where a product was made. With “greenwashing” becoming increasingly common today, a DPP assures consumers that your product lives up to its sustainability and quality claims. Once DPPs are fully implemented, companies will no longer be able to make vague claims about how they are helping the planet; they must have data and information streams that authenticate said claims.
Finally, the accurate data generated on a DPP helps enterprises optimize operations. Product development teams have large swathes of rich data at their disposal that can be leveraged to tailor products in accordance with customer demands. Moreover, a supply chain operator accessing a digital passport may identify logistical bottlenecks. Ultimately, the data accumulated on a DPP translates to happier customers and reduced operational costs.
Revenue from DPP solutions will rapidly grow in the second half of the decade, reaching more than US$4 billion by 2030.
Data Management Is Central to Digital Product Passport Implementation
Preparing for and implementing digital product passports involves many key stakeholders, including logistics leaders, suppliers, product managers, Information Technology (IT) teams, compliance and quality assurance professionals, marketing and communications, etc. To simplify this transition to DPPs, companies must invest in robust data management and digitalization tools.
Forward-looking companies already leverage various sustainability software, making the integration of a DPP a natural and straightforward fit into their operations. However, the companies that have lagged behind in sustainability software adoption risk losing business to competitors that have made ESG a cornerstone of corporate policy. Without an effective way to capture and distribute manufacturing, supply chain, and compliance data, the full sustainability benefits of a DPP will not be realized. Organizations can start by coordinating with supply chain stakeholders to identify how data can be orchestrated and address current technical limitations. Once these items are knocked off the checklist, it’s time to assess various solution providers and educate internal and external stakeholders about the upcoming DPP shift.
ABI Research recently published a long-form report on how DPPs affect companies doing business inside EU borders. The report delves into the enabling technologies, regulations, benefits, challenges, notable software providers, market forecasts, and winning strategies behind DPP implementation. Download the Digital Product Passports: Tech-Driven Sustainability and Traceability for EV Batteries, Construction Materials, and Pilot Use Cases deliverable to gain access to all this information.
