• A Digital Product Passport (DPP) is a mechanism for digitally collecting and sharing product data throughout its entire lifecycle. That includes production to distribution to end-of-life disposal. For example, a DPP in the form of a QR code could be attached to a t-shirt for consumers to scan and learn what it's made of and where it came from. They can also learn who and what it impacted and how to dispose of it correctly.

• To date, DPPs have primarily been used to track how finished products have changed hands after the initial purchase. With new proposed EU due diligence regulations, DPPs will soon be required on certain products sold in the EU market with additional information regarding the provenance of materials and the chain of custody from source to shelf.
• The DPP can guide you in navigating your product's value chain. Also, it can help you make data-driven decisions. This can help you mitigate risks, secure your supply, source sustainably, and establish a responsible and successful brand.
• Your DPP traceability solution should provide verifiable, unaggregated data from source to shelf. That enables you to accurately report your product’s material efficiency and environmental footprint.

If you have a multinational enterprise, you face unprecedented threats to growth. These threats can range from the risk of a global recession to supply chain disruptions to the booming demand for sustainable business. So, how can your brand shift to more strategic ways of production to safeguard your business and the planet? The answer lies in the Digital Product Passport. Continue reading to learn how the Digital Product Passport can level up your sustainable sourcing and future-proof your business.

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The Digital Product Passport: What it is and why it’s important.

A lot of people are wondering what a Digital Product Passport is. You may be one of them. A Digital Product Passport (DPP) is a mechanism for digitally collecting and sharing product data throughout its entire lifecycle. This includes everything from production to distribution to end-of-life disposal. The DPP provides easily accessible information on a product’s durability, sustainability, and recyclability for various stakeholders, including consumers and manufacturers. For example, a DPP in the form of a QR code could be attached to a t-shirt for consumers to scan and learn what it's made of, where it came from, who and what it impacted, and how to dispose of it correctly.

Primary objectives of the Digital Product Passport include:

1. Enhanced Transparency: Your consumers no longer have to rely on guesswork to determine the origin of their products and how to dispose of them properly. With a machine-readable DPP (e.g., QR code or NFC tag) attached to final products, your consumers can make informed purchases, while your brand can confidently eliminate greenwashing.
2. Simplified Compliance: By creating an audit trail of events and transactions in a product's value chain, the DPP provides your brand and suppliers with the necessary data to address compliance demands efficiently.
3. Sustainable Production: By tracking and reporting on a product's social and environmental impacts from cradle to grave, your brand can make data-driven decisions to optimize sustainability in product development.
4. Circular Economy: The DPP facilitates a circular economy by promoting eco-design and responsible production of durable products that can be reused, remanufactured, and disposed of correctly.

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So, why does the DPP matter for your business? The DPP can guide you in navigating your product's value chain, assisting you in making data-driven decisions to mitigate risks, secure your supply, source sustainably, and establish a responsible and successful brand.

The European Union (EU) Digital Product Passport

Currently, the EU is the only regulator of the Digital Product Passport at scale. As part of the EU’s commitment to make Europe the first climate-neutral continent in the world by 2050, the EU adopted the Circular Economy Action Plan (CEAP). This plan aims to make sustainable products a norm in the EU, focusing on resource-intensive sectors such as electronics and ICT, batteries and vehicles, packaging, plastics, textiles, construction and buildings, food, water, and nutrients.

To further the CEAP, the EU has introduced the DPP in related regulations and strategies, including:

Ecodesign for Sustainable Products Regulation (ESPR):

The ESPR, proposed in March 2022, mandates that any company selling products in the EU market must provide a machine-readable DPP to improve transparency around material efficiency, circularity, energy performance, and the environmental footprint of products throughout their lifecycle.

EU Strategy for Sustainable and Circular Textiles:

Published in March 2022, this strategy proposes actions for responsible production and consumption of textiles, including a DPP to standardize information between stakeholders in value chains. Information requirements could cover a product’s environmental footprint, durability, reparability, recycled content, and presence of substances of concern.

EU Battery Regulation:

The new EU battery regulation proposes that batteries carry labels and QR codes sharing product durability and sustainability information for consumers. A “digital battery passport” containing battery-specific information will also be required for LMT batteries, industrial batteries with a capacity above 2 kWh, and EV batteries. All economic operators (except for SMEs) placing batteries on the EU market must implement due diligence policies to address the social and environmental risks of raw material sourcing.

It's important to note that although the DPP is relatively new and has only been introduced in a few regulations, if you utilize it, it can simplify sourcing compliance with other requirements. Those requirements include the Corporate Sustainability Reporting Directive (CSRD) and the EU Deforestation-free Regulation (EUDR).

How To Get Started: Creating the Digital Product Passport.

Although the concept of cradle-to-grave traceability is not new, the exact requirements for the DPP are still emerging as various use cases adopt the initiative. If your company is proactive and takes the lead, you can take part in shaping the initiative for your industry and guarantee access to the EU market. Overall, the DPP must provide details about a product's entire life cycle, which could include:

Raw material sourcing

• Deforestation-free: Proof that commodities are deforestation-free with farm-location visibility.
• Carbon sequestration: Data on the carbon reduction initiatives implemented at the source, such as regenerative agriculture.
• Farmer/recycler wage: Verification that the first/last mile workers were fairly paid.

Design

• Durability: Information on material efficiency in design to reduce waste and ensure long-lasting products.
• Energy efficiency: Quantitative data on the processes used to reduce energy consumption.
• Recycled content: The percentage of recycled vs. virgin materials.

Manufacturing

• Waste management: Quantitative data on water usage and waste management in production.
• Carbon footprint: Accurate accounting of the greenhouse gases (scope 1, 2, & 3) emitted during production.
• Chain of custody: Maintained chain of custody, even after mass balance and transformations, to share verifiable data on the product’s history with stakeholders.

Distribution

• Transportation: Quantitative data on greenhouse gases emitted during transportation.
• Packaging: The environmental footprint of the packaging throughout its lifecycle.

Circularity

• Use/repair: Instructions for the consumer/end-user on how to install, use, and repair the product to optimize durability.
• Disposal instructions: Guidance on properly disposing of the product, including disassembly and recycling options.
• Remanufacturing: Reduce remanufacturing uncertainties through comprehensive information on product origin, ownership, and usage.

This list is non-exhaustive, and the European Commission will clarify DPP requirements for specific product groups once the regulation is finalized.

‍Pre-Production vs. Production vs. Post-Production DPP

The three different stages of the DPP are:

1. Pre-Production: Visibility of operations at raw material sourcing – from ensuring first/last mile workers were fairly paid to reducing harmful practices that strip the land of its resources – is essential to reporting on your product’s sustainability.
2. Production: Your product will pass through many hands during production. Maintaining the chain of custody, even after mass balance and transformations, is crucial to accurately account for your product’s carbon and environmental footprint (e.g., scope 1, 2, & 3 emissions).
3. Post-Production: Complete circularity requires tracking downstream emissions and sharing comprehensive information on the disposal and recyclability of your product with stakeholders.

Evidence-based traceability of each of these stages is essential to facilitating a circular economy. For example, a DPP incorporating the disposal and recycling instructions for a product must include data on where the materials originated to determine the percentage of recycled content and if the farmers/recyclers were paid a living wage. When you track a product throughout its entire lifecycle, eco-design can be incorporated to increase recyclability. Plus, your supply chains can be optimized to enhance material efficiency, product durability, and sustainability. This is true whether your supply chain include coffee, wood, cocoa, beef/leather, rubber, palm oil, or soy.

5 Business Benefits of the Digital Product Passport

Forward-thinking companies implementing the DPP can future-proof their business while safeguarding the planet. Five business benefits of the DPP include:

1. Securing Your Supply

Collecting and analyzing data through the DPP gives your brand valuable insights into its product’s entire value chain. By leveraging this data, your brand can optimize production processes from the source to the shelf, making data-driven decisions to smartly forecast and drive business growth and operational efficiency.

2. Counterfeit Prevention

DPPs provide a dependable solution to combat counterfeit products. They do this through precise information about the authenticity and origin of your products. By verifying the legitimacy of your products, DPPs protect your brand's reputation, foster customer trust, and minimize revenue losses caused by counterfeit goods.

3. Regulatory Compliance

By creating an audit trail of events and transactions throughout your product's value chain, the DPP enables your brand to demonstrate adherence to various regulatory requirements, industry standards, and certifications. Doing so will help your company avoid costly fines, mitigate risks, and maintain its brand reputation.

4. EU Market Access

Using the DPP is crucial if you want your business to enter the EU market due to increasing supply chain due diligence laws. The DPP will help your company meet industry standards, comply with regulations, and gain a competitive edge. This gives your business access to the large consumer base in the EU.

5. Brand Reputation

The demand for sustainable business is escalating among consumers. By implementing the DPP, your company can differentiate its products and earn the trust and loyalty of consumers tired of harmful waste and greenwashing.

How to Identify the Right Digital Product Passport Traceability Solution

Whether you’re a fashion brand wanting to add a DPP to your sustainable clothing line or a supplier aiming to prove the environmental footprint of your packaging to attract more business, selecting a reliable traceability software or partner will be key to success. Finding the right traceability solution can feel overwhelming with so many options available. The six criteria below will guide you in finding the right partner to meet your DPP needs:

Data security

Ensuring your data is tamper-proof and secure is critical. It helps you build the credibility of your DPP and maintain GDPR compliance. Look for blockchain-based traceability software. It supports your DPP with immutable records of origin, ownership, and usage on a decentralized platform. Blockchain will be essential for the safety of your confidential data from unauthorized access.

Proof of provenance

Most companies are only aware of the first few levels of their supply chains. This means you'd only know the supplier or manufacturer of your products or semi-final products. Visibility of your supply chain operations down to the source is imperative to prove your raw materials are sustainable. Your traceability partner should be built from the ground up. Meaning they have the proficiency in capturing verifiable data from the farm or landfill. For instance, the geo-coordinates of the plot of land should be linked to the farmers sourcing your commodities to verify that no deforestation was involved.

End-to-end traceability

To track and report on your product throughout its entire lifecycle – from raw material sourcing to manufacturing to distribution – end-to-end traceability of your supply chain is crucial. Your audit-proof traceability solution must map all supply chain tiers to ensure complete visibility of elements like Scope 3 emissions. Critical to success will be maintaining the chain of custody of your product from source to shelf. This is true even after mass balance and transformations, to accurately demonstrate your product’s history to stakeholders.

Real-time data

Real-time supply chain tracking will be a fundamental feature of your DPP traceability solution. To report on your product accurately, your data must be recorded in real-time as materials and ingredients move throughout your supply chain. Real-time tracking lets you keep your product information up-to-date and verifiable for auditors, consumers, and investors.

Interoperability

Your traceability partner must seamlessly integrate with your existing systems. That includes any ERP, inventory management, and other legacy systems you use to manage your supply chain, procurement, compliance, and sustainability data. If you want to create a machine-readable DPP (e.g., QR code or NFC tag), it will require smooth integration with your necessary back-office systems. System compatibility will help you streamline your operations and reduce the risk of errors and inconsistencies. Additionally, your traceability partner should capture primary and secondary data to maintain data integrity and keep your reporting accurate.

Scalability

It will significantly benefit you if you select a traceability solution that doesn’t require hardware installation on the ground. That way, you can scale your solution faster and more sustainably. Also, ensure your traceability solution is user-friendly and device-agnostic. To gather source-level data, you will need a traceability solution that can work in locations with low connectivity. That means no smartphones or apps are required.

Digital Product Passport Conclusion

In conclusion, the Digital Product Passport (DPP) is a powerful tool that provides transparency to numerous stakeholders regarding your product’s sustainability and material efficiency throughout its lifecycle. Forward-thinking companies can use the DPP to adhere to increasing compliance demands and optimize supply chain efficiency. Embracing the DPP is a strategic move for your business and a step towards a more sustainable and responsible future.

At BanQu, we have a true traceability platform built for companies across all industries, with experience in creating DPPs to prove your sustainability claims and achieve audit-proof compliance across your supply chain. Our blockchain-based platform captures verifiable, unaggregated data throughout a product’s entire lifecycle, enabling you to track and report your carbon and environmental footprint in real-time. Set up a discovery call with our expert team today!

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