For any business, major operational changes can be challenging – especially when these changes are specifically mandated for compliance with new regulations. This is exactly the case for organisations that intend to manufacture or sell physical products within the EU over the next decade as they grapple with how to prepare for DPPs.
In December 2023, the EU Commission reached a provisional agreement on a new Ecodesign for Sustainable Products Regulation (ESPR), which will set design and performance standards for specific product groups, intended to improve their sustainability, energy performance, and overall circularity.
Recognising the need for up-to-date and accessible product information to enforce the legislation, the ESPR will require affected product groups to contain Digital Product Passports. For some industries such as Textiles, DPPs must be in place by 2030, with many other industries like Consumer Electronics and ICT to follow suit.
While penalties for non-compliance haven’t yet been specified, they may include fines, confiscation of assets, and business sanctions, leaving organisations to ponder over how to prepare for DPPs and implement them effectively before their respective industry deadlines.
What are Digital Product Passports?
Digital Product Passports (DPPs) are a mechanism for sharing product data throughout the product’s lifecycle and across the supply chain. Accessible via QR code, RFID tag or NFC technology, DPPs can be attached to physical products to give a holistic view of their lifecycle from manufacture to sale, through their eventual recycling, resale and beyond.
Giving stakeholders reliable access to product data can drive sustainable logistics decision-making, maximise product authenticity and integrity, and encourage supply chain circularity. DPPs also offer a novel touch point for customers, enabling brands to strengthen customer relations, respond to queries, and offer additional services.
The EU is looking to make DPPs mandatory across a multitude of physical product groups. Some forms of batteries are mandated to have a form of DPP in place as early as 2027 via the Battery Passport Regulation, and the Construction Product Regulation may include earlier provisions for DPPs in construction products as well.
Not only does this raise questions for affected organisations around the cost and logistics of implementing a successful rollout of the technology across their entire product set in time to meet these deadlines, but also around exactly how to prepare for DPPs as the specific requirements haven’t been fully released yet.
To help organisations at this crucial juncture, we’ve put together a list of 7 tips on how to prepare for DPPs below.
1. Research the relevant regulations
Firstly, organisations need to understand which of the new regulations (if any) apply to them. If you manufacture or sell physical products within the EU, there’s a high chance that at least one of them will affect your organisation.
For example, the Battery Passport Regulation mandates that DPPs in the form of battery passports must be integrated and accessible via QR code for some battery products as early as 2027, such as:
- Batteries in light means of transport (LMT)
- Industrial batteries with a capacity greater than 2 kWh
- Electric vehicle (EV) batteries
For Construction, the Construction Product Regulation seeks to improve the data flow for construction products, adopting a wide scope of information that is to be contained in those specific DPPs.
The main piece of legislation to understand, however, is the ESPR, which will mandate DPPs for as many as 30 product groups. Some product groups such as Textiles/Apparel have an implementation deadline of 2030 for DPPs, with other industries set to follow suit in the years after.
These include (but are not limited to):
- Consumer Electronics
- ICT
- Furniture
- Chemicals
- Plastics
The ESPR applies not only to products manufactured in Europe but also to those being sold within the EU, meaning global manufacturers and retailers are not exempt. The industries exempt from the ESPR are food, feed, and medicinal products. Even if it’s still unclear which of the legislation above applies to your organisation after doing some research, it’s still beneficial to invest in a DPP solution.
Not only do DPPs help with the stringent compliance requirements of the updated CSRD and CSDDD laws by providing quality sustainability information, but they also deliver very real operational value in enhancing product authenticity and traceability, improving supply chain visibility, and enabling more thorough product lifecycle analysis.
2. Create a DPP strategy with clear goals and actions
Once you’ve researched the regulations and determined that your organisation will implement DPPs, the next step is to start creating a clear and concise DPP strategy. Your strategy must comprise clear goals and actions that address the following questions:
- What will DPPs look like for our product set?
- What type of data carrier will we use?
- What data do we want (and need) to include?
- How much of this data do we currently have access to, and how much of it will need to be gathered from external sources?
- What internal and external stakeholders do we need to engage and collaborate with?
- What level of budget do we need to allocate towards our DPP implementation?
While this list of questions isn’t exhaustive, and there’ll likely be additional questions depending on the size and complexity of your internal organisation and external supply chain, the questions listed can act as a general starting point.
As well as answering these questions, set clear goals related to devising a clear strategy and timeline that match up with regulatory deadlines, the engagement of internal and external stakeholders, and data gathering in line with your organisation’s requirements – and map out the actions required to achieve them.
Protokol’s eBook on how to prepare for DPPs gives detailed guidance on building your DPP strategy.
3. Engage internal & external stakeholders
This can be a tough task as a full DPP implementation will require significant buy-in from not only senior management but also many lower-level internal stakeholders across multiple departments – not to mention that it will require significant collaboration and effort on the part of external stakeholders, too.
DPP implementation will affect multiple operational areas and departments and will necessitate changes to processes and outputs across them.
For example, data and IT departments will be heavily involved in managing the influx of new data. Product and supply chain management departments will need to adjust to ensure that they’re ready to make the operational changes necessary to capture DPP data. Legal and compliance departments will need to ensure they remain up-to-date and reactive to the most recent legislative changes.
Other departments that may be directly involved or affected:
- Business Management
- Customer Support
- Human Resources
A strategic, proactive approach is the best way to ensure a smooth transition towards DPPs. Utilising the strategy you’ve started to build, determine the exact role that each internal stakeholder group plays throughout the implementation and beyond, and set up a communications plan accordingly to inform them.
The complexity of your organisation’s external supply chain comes into play here, also. To gather the necessary information, it’ll require liaising with various supply chain actors.
Make sure to consider both upstream and downstream supply chain actors. Upstream includes international factories that manufacture your products, raw material extractors, and logistics partners. Downstream supply chain actors include your retailers, warehousing, delivery services, and even recycling and disposal organisations.
Use the concept of value chain analysis to map out your organisation’s value chain. Determine each external stakeholder’s role within it, the data that they hold, and their relevance to DPP implementation.
Organise meetings with the appropriate representatives of each external stakeholder business, creating an agenda to discuss the impact of their collaboration, the value that they’ll gain from working with you to implement DPPs, and what their responsibilities will entail.
4. Identify and assess data points, begin data gathering
Depending on the size of your operation, you may collectively have thousands of data points – many of which will need to be included within your DPPs.
This can include product data such as ID, ownership, and warranties which will be generated internally. Externally, you’ll have raw material composition, sustainability and carbon footprint, and recyclability being sent to your organisation continuously from your supply chain partners.
There’s a possibility that this data could vary wildly in degrees of quality, and it can be a challenge to map out all of these coherently.
For example, you may have an extremely robust data management strategy internally, but you may not have visibility into the data practices of the factories you use to assemble your product or the retailer that sells it. Low-quality data sources could cause unnecessary compliance issues, leading to fines and potential reputational damage.
As part of your evolving DPP strategy, evaluate the individual data sources and assess the quality of that data in terms of the source’s reliability, security, and transparency.
Equally, determine the availability of the data you need for your DPPs – does it exist, and if so, is it possible to find? Review the required data points for your product category and perform a detailed Data Gap Analysis.
This is a crucial step in ensuring that the specific data required to be included in DPPs is both available and accurate.
5. Assess technology options
At the time of writing (April 2024), there hasn’t been a specific technology type that the legislation specifies the DPP initiative should be built on, although there are recommendations within the ESPR in relation to:
- Centralised storage (e.g cloud computing or on-premises)
- Decentralised storage (e.g blockchain technology)
This means that so far, each organisation can choose for themselves which technology, or combination of them, suits their business best. However, the European Commission recommends a ‘company-managed’ solution for storing DPP data.
DPPs could be built using centralised cloud solutions for data storage. Cloud solutions are widely used throughout supply chain ecosystems already, which could result in a speedy implementation and easier alignment across industry players. However, a significant amount of extra governance would be required to ensure transparency.
Integrating blockchain technology and decentralised data storage offers a powerful alternative. Blockchain’s inherent data security and immutability help to solve issues such as data tampering. Implementing a decentralised database helps reduce the threat of data breaches by removing the ‘single point of failure’ that centralised databases have.
Additionally, organisations in the EU have been developing the idea of Data Spaces – common data infrastructures and governance frameworks across the region – which could help solve the issues of transparency and access.
The likelihood is that for most enterprises considering DPPs, a hybrid combination may be the most robust solution. There are a number of DPP solutions on the market – it’s up to each organisation to research and assess the available technologies carefully.
6. Initiate a pilot programme
Once you’ve built your strategy and scoped out the infrastructure, it’s time to build a pilot programme to give a high-level overview of what DPPs will look like within your business from a practical perspective.
This will serve as a testing ground for identifying and rectifying any issues around system interoperability, help you assess the impact of DPPs on your day-to-day operations, and get the relevant stakeholders fully prepared for the full implementation.
It may be the case that your business only creates one product that necessitates DPPs. But for larger organisations that have products that span several categories, it could be beneficial to elect a select (ideally low-impact) product group for the pilot programme.
Take careful and meticulous records during this phase.
7. Results, scale and integrate
When the pilot programme has concluded, collate those results and examine them closely.
- Are there additional product lines or data sets that could be included that you hadn’t already considered?
- Has the scope and scale of the project changed in any way upon seeing DPPs in action?
- Have you thoroughly examined any business and/or operational processes that may need to be updated in conjunction with the rollout of a live DPP solution?
Additionally, make sure to review the appropriate regulation again for any updates. Bear in mind that the regulations are still in progress, so any changes in the nuances of these regulations could greatly impact your live solution rollout.
Some significant challenges could arise during this process, such as struggles with data collection and management, difficulties in integration with existing systems, and responding rapidly to changes in legislation.
However, completing these seven steps will help to form a solid foundation for the complex process of DPP implementation, as well as help in charting your roadmap to compliance.
Conclusion
Early engagement and strategic planning are essential for overcoming many of the challenges that will arise from implementing DPPs. By adopting a proactive approach to DPP implementation, businesses can overcome many of the barriers that might hinder compliance. Read our ebook for a more in-depth overview of how to prepare for DPPs.
Once you’re ready to take the next step, finding the right consultative and technological partnership that can guide your organisation through the process of scoping and implementing DPPs is crucial. Protokol offers Digital Product Passport consulting and solutions tailored to your businesses needs and operational requirements.
Our DPP solution, the Protokol Digital Product Passport enables organisations to capture and record product data to maintain compliance with the EU’s new DPP requirements.
As a customisable solution, the Protokol Digital Product Passport will not only ensure that your organisation is compliant with the EU DPP mandate, but can also help your organisation deliver on your unique ESG and corporate goals — such as improving supply chain visibility and traceability, enhancing your customer experience by unlocking new direct communication channels and enabling product authentication.