To replace the post-industrial ‘take-make-destroy’ model of production and consumption, the European Commission is putting a plan in motion to ultimately achieve the target of climate neutrality by 2050 by bringing about a more circular economy facilitated by Digital Product Passports.
Limited knowledge of climate change among consumers and the apathy of businesses chasing profit have helped maintain an economic system built upon processes that degrade the environment, release copious amounts of greenhouse gases into the atmosphere, and consume natural resources at an unsustainable rate.
Now, attitudes are shifting. Customers are becoming increasingly eco-conscious, with an increasing number of customers stating that a business’s sustainability is an important factor in their purchase decisions.
This trend coupled with robust legislation from supranational organisations are putting businesses under increased pressure to clean up their operations and engage in the circular economy.
What is a Circular Economy?
The Ellen MacArthur Foundation defines a circular economy as ‘a system that tackles climate change and other global challenges, like biodiversity loss, waste, and pollution, by decoupling economic activity from the consumption of finite resources.’
This new model of production and consumption involves a concerted effort to extend the lifecycles of products by promoting their reuse, remanufacture, and recycling to keep wastage to a minimum and ending practices such as planned obsolescence.
The circular economy model promotes reducing the world’s reliance on raw materials, as their extraction and refinement are some of the most pollutant processes involved in manufacturing goods.
The global material footprint (total amount of raw materials extracted to meet consumption demands) rose by 70% from 2000 – 2017, with raw material processing accounting for almost 20% of the EU’s consumption-based GHG emissions.
Rare earth elements (REE) and minerals have become increasingly vital to power our smartphones and laptops and are lost needlessly when these products are discarded. Within the circular economy, these products are especially targeted for refurbishment, and recycling the rare earth minerals within them.
Circular Economy Legislation
To enshrine the principles of the circular economy into law, supranational organisations across the globe have started to take sweeping legislative action. For the EU, this comes in the form of the Circular Economy Action Plan (CEAP) – one of the pillars of the European Green Deal.
The CEAP brings in several wide-reaching measures to increase sustainability and curb waste across the region. This includes holding businesses accountable for the products that they manufacture and sell within Europe.
The Ecodesign for Sustainable Products Regulation (ESPR) is the cornerstone of the CEAP’s effort to extend the lifecycle of products, introducing new design requirements that make sustainable products the norm rather than the exception.
The ESPR mandates organisations that fall under its purview to implement Digital Product Passports (DPPs) as a key piece of informational infrastructure and a tool for enabling the transition towards the circular economy.
What are Digital Product Passports?
DPPs are a data-sharing tool that can be attached to physical products, enabling stakeholders throughout an organisation’s value chain to share information about the product’s lifecycle.
This data sharing is crucial as it enables circular thinking and promotes stakeholder collaboration to increase sustainability, helping consumers make more sustainable purchasing decisions.
The regulation states that this data must be verifiable, accurate, and up-to-date. DPPs can contain all manner of information relating to product lifecycles, including:
- Raw Material Composition
- End of Life Instructions
- Instructions for Remanufacturing
- Sustainability/Carbon Footprint
- Recyclability
- Water Usage
- Overview of Harmful Materials
- Warranties
Democratising access to this data helps to foster collaboration between disparate supply chain stakeholders, empower sustainable customer and investor decision-making, and help businesses prove their sustainability claims to external auditors – allowing them to comply with legislation such as the CSRD and solidify brand reputation.
The ESPR came into force on 18th July 2024. The first working plan for the regulation is set to be released in Spring 2025 and will outline the proposed timeline for delegated acts for priority industries.
Companies within these industries will need to implement Digital Product Passports – some potentially as early as 2027.
Digital Product Passports and Circular Economy Use Cases
There are several ways that DPPs facilitate circular use cases — from enabling more circular and sustainable design and reducing emissions and waste to removing the barriers to recycling or reselling. Below are some of the top circular economy use cases facilitated by Digital Product Passports:
1. Powering Sustainable Design and Circular Thinking
One of the main points of the ESPR is to encourage sustainable design for all new products, gradually making sustainable products the norm in the EU. This will mean that customers can rest assured that any physical product they buy (covered by the ESPR) will have passed a certain sustainability threshold during its creation.
DPPs give an overview of a product’s material composition, including the most harmful and least sustainable components. Retailers can review this when deciding which products to purchase wholesale, as well as being able to make comparisons before purchasing.
Imagine there are two competing manufacturers aiming to supply a retailer with their product. The retailer can use DPPs to compare both manufacturers’ product ranges and do business with the one that most meets the retailer’s sustainability criteria.
The economic effect this could have will drive manufacturers to create products in line with retailer, customer, and legal sustainability demands.
As the products move through their lifecycle, the manufacturer and retailer can collect further usage information such as durability and recyclability. They can then use this information to inform future product design, further boosting sustainable design and circular thinking.
2. Enabling Verifiable Services and Repair Records
Many products, such as consumer electronics for example, can be repaired when they start to fail or have their internal mechanisms refurbished to extend their lifecycle. However, at present, around 40 million tonnes of electronics are thrown away worldwide, comprising 70% of the world’s toxic waste.
To change this throwaway culture, DPPs can help provide a robust platform for customers to engage with the circular economy in electronics. Among the robust product composition data that DPPs can provide, they can also give customers detailed, transparent records of and instructions for repair for each product.
Immutable, updatable digital records linked to each product can help second-hand buyers and sellers manage the various warranties, records of refurbishments, and after-sale services that add value to the sale, rather than relying on word-of-mouth or paper documents.
This will provide confidence for second-hand purchasers that the product is made of quality components and that it’s been repaired reputably. This helps products stay in use for longer and supports a thriving second-hand retail market.
3. Facilitating Product Takeback Schemes
To push product circularity further, product takeback schemes could be implemented with the help of Digital Product Passports.
Takeback schemes (or programs) relate to brand-led initiatives for managing products at the end of their lifecycles. They generally work by incentivising customers, usually financially through loyalty points or discounts, to return end-of-life products to the retailer.
The retailer can then either repair and refurbish them for resale or send them to recycling companies for processing. This helps to control the flow of products at the end of their life to reduce the burden on customers to dispose of the item properly.
All of the relevant information for implementing a takeback scheme can be contained within the product’s DPP, with the DPP acting as a direct communication channel between the brand and its customers.
For instance, the DPP can contain instructions for when and where to return the product and what benefits they’ll receive for doing so. This can be communicated via the DPP to second-hand buyers, offering additional value to the purchaser and potentially increasing brand recognition leading to future first-hand purchases.
This will also help organisations comply with various Extended Producer Responsibility (EPR) mandates which state that the original producer/retailer of the product is still responsible for the product throughout its lifecycle.
By incentivising purchasers to return the product at the end of its lifecycle, organisations regain control of their product at the crucial point for EPR compliance, disposing of it themselves according to the law.
4. Improving Recycling Rates and Reducing Waste
In order to improve overall recycling rates, individuals and recycling companies alike need to know what a product is made of to be able to recycle it effectively.
There’s a lack of general education and knowledge about how to recycle effectively, especially when it comes to more complex items comprised of potentially toxic plastics. This complexity for consumers leads to many consumers simply throwing away end-of-life products containing plastic. Those products are then incinerated, degrading the environment.
DPPs can provide not only a detailed breakdown of the product’s makeup including toxic plastic additives but can also deliver step-by-step recycling instructions for each component. Eco-conscious customers can then use that to recycle the product as efficiently as possible.
For more complex products requiring mechanical recycling, these material breakdowns and detailed recycling instructions can be accessed by specialist recycling companies.
Customers can be incentivised to send their products to these companies as well as containing information on how and where to send them, providing customers with peace of mind that they’re doing the most they can and increasing the volume of business for the recycler.
Conclusion
Many efforts are being made to create a global, interconnected circular economy. To do this, the EU has introduced legislation such as the ESPR, which aims to make sustainable products the norm in the EU and beyond.
Digital Product Passports can help in enabling the transition to towards a more circular economy, such as powering sustainable design and promoting circular thinking, enabling verifiable services and repair records, facilitating product takeback schemes, and improving recycling rates and reducing waste.
The ESPR mandates Digital Product Passports as a key tool to support the circular economy, and businesses will need to comply by preparing to implement DPPs as soon as possible.