Digital Product Passports (DPP) are a mechanism for collecting and sharing product data throughout its entire lifecycle used to illustrate a product’s sustainability, environmental and recyclability attributes. Recorded product data from across the supply chain including raw material sourcing and manufacturing process is captured on the DPP and shared amongst a number of stakeholders and participants – unlocking benefits, use-cases and value across entire ecosystems.
Although the concept of ‘cradle-to-grave’ product tracking isn’t new – utilising blockchain technology to record and cryptographically secure product data through a Digital Product Passport is an emerging solution that is growing rapidly in business uptake. This solution is also one that places more emphasis on end-user accessibility than others – with consumer benefits and value derived equalling that of businesses, which isn’t always the case with alternative mechanisms.
The broader Digital Product Passport concept will evolve over time in terms of utility, but in its current form, they are largely being scoped and utilised within sustainability, recyclability and environmental initiatives – all of which fall under the ‘circular economy’ umbrella.
It should be noted that although Digital Product Passports have a seemingly fixed purpose at this stage, the underlying concept and technology is still relatively nascent and developing. This guide will surface additional use-cases that sit outside of the current key scope, signalling numerous opportunities that businesses can unlock for their organisation and customer base.
Circular Economy and Sustainability
At the heart of the current Digital Product Passport discussions are the concepts of circular economy and sustainability. The circular economy initiative looks to transform the way that we produce, consume and utilise products and resources – aiming to cut waste to a minimum and extend both resource and product longevity.
This is part of a broader pledge to enable the world and its population to become more sustainable – enabling all stakeholders to optimise the use and reuse of valuable resources and materials. Under the circular economy framework, nothing of value is wasted through new approaches to sharing, repairing, reusing and recycling.
2. Paving The EU Roadmap for Digital Product Passports
It’s not just innovative thinking that’s providing the catalyst for business adoption of Digital Product Passports. In Europe, a whole host of policies and regulations (either in the proposal or implementation stage) have been drawn up by the European Union largely under the European Green Deal (EGD) which carries the long-term goal of enabling the continent (Europe) to reach net zero emissions by 2050.
Under the EGD, there is the Circular Economy Action Plan (CEAP) which came into force in March 2020 and is more directly related to the topic of Digital Product Passports and their proposed usage from a governmental (European Union) level. The CEAP details the European circular economy strategy and contains multiple key goals related to ensuring product sustainability, producing less waste and empowering consumers to make more informed decisions on product purchases. Further to this, under the CEAP and supplementary initiatives, several industries will be targeted as the first batch to face industry-wide regulations related to helping the European Union (and by extension the continent as a whole) achieve its sustainability goals.
To better illustrate the policies currently in place or being proposed at the European Union level related to product sustainability and Digital Product Passports. The below lists several relevant items that largely all fall under the broader Circular Economy Action Plan (CEAP).
- Ecodesign for Sustainable Products Regulation: This is currently in the proposal stage that was published in March 2022 and is a key tenant of the CEAP. This regulation is focussed on improving the overall circularity and both energy and environmental sustainability performance of products. This framework will set guidelines and benchmarks on multiple components including product durability, reusability, resource efficiency and carbon footprints. As per the regulation proposal, the key mechanism for capturing and sharing this data is a Digital Product Passport solution that will provide multiple stakeholders with a detailed breakdown of the products’ sustainability credentials.
- EU Strategy for Sustainable and Circular Textiles: This is in the implementation stage as of March 2022 and is another key area of the CEAP. This regulation is focussed on improving the overall circularity of textiles found in clothing, buildings and vehicles among others. The key goal is to essentially improve the longevity and durability of textiles and to increase the ease of repair and recycling. There is a heavy consumer/end-user aspect embedded into this legislation that enables them to verify the ‘green claims’ of the companies they are purchasing textile products from. As per the official regulation, Digital Product Passports will be utilised as the key solution for enabling this mechanism and goal achievement.
- Construction Products Regulation (CPR): This is in the implementation stage as of March 2022 and is another key area of the CEAP. This regulation is focussed on ensuring that construction products across Europe abide by safety and environmental criteria. The framework being built lends a hand to the usage of Digital Product Passports.
- (New) EU Battery Regulation: This is currently in the proposal stage that was published in December 2020 and is another key area of the CEAP. This regulation is focussed on ensuring that batteries within the EU area are sustainable and safe that carry high levels of recyclability. This is due to be implemented over the coming years, with 2026/7 proposed for it to take effect in the industrial and EV car battery markets. Again, a Digital Product Passport (or Battery Passport as noted) will be the key solution powering this regulation.
As per the CEAP’s guidelines, the three sectors of textiles, batteries and construction will be the first to utilise Digital Product Passports due to their inherent (high) circularity potential and recyclability factor along with their current climate impact.
These three sectors are just the start however, and the European Union (under the CEAP) has already earmarked additional near-future target sectors and markets to utilise Digital Product Passports that include electronics & ICT, packaging, plastics, food & water among others.
3. A Digital Product Passport Solution
A Digital Product Passport essentially creates a digital twin of a physical product and securely records event, transactional and sustainability-based data from across the product’s lifecycle. The digital twin is commonly associated to the physical product via a QR code, barcode or other technology such as NFC tagging – with the Digital Product Passport being accessible via a smart device application or similar.
For example, a consumer could scan a QR code embedded onto the label of a clothing item and be immediately redirected to the associated Digital Product Passport to view data on the product’s sustainability credentials, ownership history and even details on how to recycle.
Although the current legislation and scope of Digital Product Passports its firmly focused on proving sustainability credentials – by scaling and diversifying the actual data collected through a solution, the use-cases and opportunities expand.
This means that the digital twin concept and Digital Product Passport technology is not limited solely to those markets such as textiles and batteries who are being directly targeted on a European Union level. This technology is open to all businesses, regardless of industry to experiment and utilise for long-term business and customer value.
In fact, many industries are already jumping ahead of the curve and utilising Digital Product Passport technology to unlock additional use-cases related to transparency, traceability and tradability.
Data Collection & Sharing
When taking a more holistic view of Digital Product Passports in terms of their current and potential utility – there are multiple different data categories that can be collected and subsequently shared across entire ecosystems and value-chains.
- Ownership: This incudes details related to past and current owners of a particular product including detailed breakdowns of ownership duration and a specific event audit trail. The level of ownership detail could of course be configured based on unique use-cases, but an example here would be clothing and luxury good resale whereby ownership could also be transferred through the digital passport application.
- Source: Referring to the origin of raw materials and components utilised within the manufacturing and development of the product. Further to this, details regarding the sustainability of the actual manufacturing process itself, and whether ethical practices were abided by could also be recorded and accessed. An example here would be a consumer being able to validate whether the green claims of a company they are purchasing from are legitimate.
- Repairs: Details related to the repairability attributes of a product, and the actual repair ‘events’ that have occurred throughout a product’s life. This could include a deep dive into the location/outlet that carried out the repair, details of the actual repair and cost, along with any supplementary notes to build context of why repair was required in the first instance. And example here would be a luxury watch owner who initiates a repair to their item after accidental repair – with all details recorded on the associated digital passport.
- Warranties: Digital versions of warranty, service, insurance and guarantee documentation that can be immutably stored within a digital passport and accessed by all relevant parties. This would also contain expiry, and any repurchase data that an end-user could use to validate their claims and coverage. An example here would a vehicle owner who elects to utilise a free service package that they have previously purchased. Via the digital passport associated to the vehicle, the vehicle brand’s service department would be able to verify the owners claim without the need for standard administrative processes.
- Footprint: Includes data that consumers can access to ascertain the carbon footprint used either through the manufacturing process, or through actual usage of the product. This can reinterpret data held within categories above, such as providing details on the energy utilised within the manufacturing process, or what raw materials or components of the product are made from recyclable materials.
- Identity: This refers to general product information and data that is used to identify the product provenance including batch numbers, reference numbers and manufacturing dates. This is particularly useful when for example, a consumer wants to verify the authenticity of the product and avoid purchasing a counterfeit or forgery.
As previously mentioned, Digital Product Passports as a technology is still early and use-cases continue to grow – directly tied to the type of data being collected. Ultimately, Digital Product Passports provide multiple parties including manufacturers, consumers, re-sellers and recycling entities with a full audit-trail of events and transactions that have occurred through a product’s life.
For now, the key focus is on the sustainability, repairability and recyclability of a product that all ties into the broader circularity of the actual product. But as more businesses dive into the technology and understand its potential, Digital Product Passport use-cases and opportunities will continue to scale.
Blockchain technology acts as the perfect foundation on which to build a Digital Product Passport solution for several reasons.
- Data Security: A consensus approach to validating data, underpinned by the most robust encryption system virtually eliminates data tampering and fraud. Decentralized technology also removes single points of failure securing data like never before.
- Immutability: As an immutable digital ledger, blockchains offer an extremely high level of trust in the data they contain. Consensus-based data validation guarantees that the information held is accurate and hasn’t been changed or tampered with by malicious parties.
- Transparency: All blockchain transactions are provable, traceable and searchable on-chain, providing complete transparency for all ecosystem stakeholders in relation to the data stored within Digital Product Passports.
- Efficiency Data is processed, exchanged and validated quickly with blockchain. The execution of smart contracts enables processes to be streamlined. This also cuts out the overreliance on intermediaries and 3rd parties – driving efficiency and data proficiency.
- Decentralization: Blockchains are decentralized, censorship-resistant, and less vulnerable than legacy technologies that rely on centralised servers.
Customer Experience Layer
Digital Product Passports offer the opportunity for businesses to leverage an additional channel, one that provides a direct link to their customers. Marketing, sales and customer success teams can all utilise the digital passport application as a means of offering new services or features that are otherwise unavailable.
An example of this is Breitling, who via their blockchain-powered digital passport enable customers of their luxury timepieces to claim ownership of their watch and access exclusive services.
This is an early example of how digital passports provide additional value outside of the core usage and how the concept will continue to evolve and open up new opportunities for both brands and customers.
4. The Value of Digital Product Passports
As Digital Product Passports impact and involve multiple stakeholders from across value-chains and sectors – the benefits and value are far reaching. From organisations, to consumers, to policy makers and recyclers – digital passports provide benefits for all.
Benefits to Businesses and Organisations
- New Business Models: The push towards a circular economy with more focus on product longevity provides a plethora of new business opportunities that can be utilised to unlock additional revenue streams and growth drivers for companies. Circularity may for example enable an entirely new repair and service function for businesses that further provides the opportunity to forge stronger relationships with customers. Digital passports can be seen as an additional channel that marketing, sales and business operations can tap to provide new services and an enriched customer experience.
- Increase Consumer Trust: By recording events across the full lifecycle of products from manufacturing all the way to recyclability or disposal – businesses can offer consumers a fully transparent view into the authenticity and state of the product they are purchasing. This is backed up by the finding that 46% of consumers want clarity on product sourcing. This effectively increases buyer confidence and can maximise retention and loyalty.
- Validate Green Claims: Greenwashing is becoming a serious issue that is tainting the reputation of companies who are making legitimate claims. Through a digital passport, the sustainability attributes and claims are fully validated and secured on an immutable blockchain network – which is crucial as 53% of consumers can’t identify greenwashing claims. This also enables businesses to optimise their circular strategy and become a sustainability leader in face of increasing demand from their customer bases to do so.
- Customer Protection: By ensuring that the raw materials and manufacturing processes abide by pre-set standards, businesses can protect their customers from illegitimate, dangerous and sub-par raw materials and end-products. By extension, this protects the brand from negative PR issues such as product recalls and incidents caused by product defects.
- Ensure Compliance: Supply chains can become incredibly complex and difficult to track, meaning that organisations may legitimately lack the required data to monitor their compliance and sustainability performance. Through digital passports as a single and shared source of truth – this data can be more easily tracked and accessed, leading to businesses being able to track their compliance with initiatives in real-time.
Benefits to Consumers and End-Users
- Buyer Confidence: Digital passports enable consumers to make more informed purchase choices related to the sustainability performance of the brands they buy from. As consumers are beginning to increasingly favour brands that back-up their green-claims, digital passports are a perfect tool. This is reinforced by the finding that 33% of consumers have stopped purchasing from a brand over sustainability concerns. Further to this, there has never been a time where consumers haven’t cared about the state, authenticity and history of the products they purchase, so by having an accurate depiction of the products’ lifecycle at hand, buyer confidence will continue to grow.
- Maximised Product Value: Similar to the above, consumers can rest assured that their products are legitimate – enabling them to avoid faulty or forged goods. This contains added benefits when the consumer chooses to enter the burgeoning resale market to resell their products. Being able to prove that their product is legitimate protects product value.
- Identify Greenwashing: As previously noted, digital passports are a perfect tool to enable consumers to identify greenwashing and validate a company’s claim in relation to their green initiatives. Though the immutability and transparency provided by blockchain, consumers can identify whether they are being purposely misled. A case to outline this is the fashion brand H&M who is being sued for their claims of environmentally friendly clothing – when in fact this turned out to be misleading. Through a digital passport, consumers will be able to detect any false claims immediately and independently.
- Recognise Carbon Footprint: Many consumers who are seeking more sustainable responsibility from their chosen brands are looking to improve their own performance and reduce their carbon footprint. Depending on the type of product, accurate data on energy consumption and environmental impact can be gathered from an associated digital passport, which could also include additional blockchain-enabled services. For example, through tokenisation, a clothing retailer could incentivize consumers to recycle their end-of-life clothes (at official recycling partners or in-store) and be rewarded with a ‘sustainability token’ that could eventually be traded for loyalty rewards or other perks. Blockchain and digital passports opens new doors for encouraging positive action from consumers in joining the pledge to champion circularity.
Benefits to Policy Makers and Governing Bodies
- Verify Compliance: By utilising a DPP framework, policy makers such as the European Union and member states will be able to locate, analyse and evaluate business compliance with sustainability initiatives. In essence, DPP’s provide a unified basis for tracking the sustainability performance of business entities and organisations, providing a mechanism for policy makers to benchmark KPI’s and take necessary action if required.
- Drive Sustainability: By creating an immutable platform for recording sustainability data and enforcing policies – businesses and organisations will be forced to follow guidelines, particularly when their ‘green performance’ is fully open and transparent. Under a digital passport system, greenwashing and false claims are significantly reduced, giving policy makers the best chance of meeting their key sustainability, resource optimisation and circularity goals.
5. The Impact of Digital Product Passports
This guide has introduced the key drivers behind Digital Product Passports and their unique components. Although the current focus is on proving sustainability and enabling the circular economy initiatives, there are multiple other use-cases and opportunities that can be unlocked once the scope of digital passports is expanded.
Digital Product Passport Use-Cases and Opportunities
- Enable Circularity: A secure digital twin of a physical product is created using a digital passport. The digital twin is a unique digital representation of each individual product. Data on a product’s lifecycle, ownership and source can be easily and securely recorded, and is easily accessible for both businesses, policy makers and customers. Plus, unlike physical certificates, digital twins cannot be forged, replicated, damaged or destroyed. By updating the digital passport throughout its life, a full view on its circularity is captured and stored.
- Provable Sustainability: Digital passports enable businesses to both trace the source and prove the sustainability of their products. Data relating to provenance of raw materials, manufacturing, batch details and more are recorded on a transparent and immutable blockchain, where data cannot be overwritten or forged. This allows brands to prove sustainable sourcing practices for their goods to auditors, regulators and consumers alike.
- Identify Counterfeits: Authenticity of a product is provable with a digital passport. For brands such as fashion where counterfeiting is a huge challenge, product passports quickly and easily determine not only whether a product is authentic but can even verify ownership (while protecting the owner’s personal details). The ability to present the digital passport alongside the linked physical product will enable brands and consumers alike to effectively combat the counterfeit market.
- Resale Verification: As resale markets continue to grow, so too does the need for a tool that can rapidly and accurately authenticate goods. Not only does a digital passport enable customers to verify the authenticity of their goods before transferring ownership; but the fast and easy verification of second-hand goods generates real opportunities for brands themselves to unlock new revenue streams in profitable resale markets.
- Experience & Education: Digital passports can act as an additional channel that directly interfaces businesses with their customer base. Not only can extra services be offered through digital passports such as priority repair and customer services, but it acts as the ideal channel for educating customers on the importance of sustainability. As previously mentioned, businesses could go a step further and utilise blockchain tokenisation to gamify and incentive sustainable behaviour from customers – leading to increased retention and loyalty.
6. The Way Forward
It’s clear that sustainability and circularity are no longer ‘nice to haves’ but are instead quickly becoming a key strategic priority for organisations, brands and even consumers. On the policy-making level such as the European Union, legislation has already passed that is paving a future that heavily features Digital Product Passports.
For stakeholders within the textiles, construction products and industrial/EV battery sectors – the mandatory adoption of Digital Product Passports are already becoming a reality. For those not within these sectors, now could be the ideal time to begin experimenting to gain first-mover advantage before their sector is potentially affected in the same way. Supporting this is the increasing desire from consumers to purchase from sustainable brands and to have access to verifiable information on their green claims.
How Protokol Can Help
At Protokol, we are experts in Web3 and blockchain technology. 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.
Take the first step today book a call with our experts to discuss your requirements and objectives.