How CSOs can leverage digital product passports to achieve circularity

The term “circularity,” like others in the emerging field of sustainability—net-zero and carbon-neutral, to name a few—still exists behind a veil. A hallmark of sustainability ideals, the circular economy is one in which materials and products are used several times over, either via recycling or repurposing, to eliminate needless waste from the supply chain. 

A key factor thwarting the widespread adoption of circular economy principles is that information is not being passed along the supply chain, making it hard for a product's owner to make correct choices about repairing, reusing, or recycling it. But the European Union has a solution: the digital product passport (DPP) – a unique, digital identity for every individual product that can be traced through its production, use, and eventual end-of-life. 

This not only fosters transparency throughout the supply chain but can also help businesses tighten their operations. It also extends the life of products and ultimately paves the way for a more circular economy. 

“Like nutrition labels did for food since the 70’s, DPPs will do for other products,” says Neil D’Souza, chief executive of the German startup Makersite. “The transparency that nutrition labels created, led to a behavioral change in how we see food and how it affects our bodies. That, in turn, changed the food industry to focus on healthier food, nutritional budgets, and better living. That’s the idea behind DPPs.” 

Collecting this data creates a system for storing, securing, and accessing digital evidence that demonstrates, for example, that the materials a brand uses are majority recycled, responsibly sourced, etc. 

“In the future, DPP has potential to create customer value as a part of product storytelling and lifecycle,” Marjut Lovio, Marimekko sustainability manager, said. “We believe this guide can help the industry in moving toward circular business models.”

The European Union has mandated that DPPs be rolled out across certain industries, including textiles, construction, industrial and electric vehicle batteries, as soon as 2026. However, creating and managing this data infrastructure can seem daunting. Here’s everything you need to know about DPPs and how they can suit your business. 

What is a digital product passport? 

A DPP consists of three primary components: 

1. A physical label: Any DPP must have a physical component with a visible label, whether it is a label on a bottle or a tag attached to a garment. It’s fingerprint, so to speak.
2. A unique digital identity: Each product is assigned a unique digital identity, such as a serial number, that can be shared throughout the supply chain. While some companies may seek to make their own identification system, they may be better off adopting global standards such as those established by GS1. 
3. A data carrier: The product needs to be embedded in a data carrier, such as a QR code, an RFID tag, or an NFC tag, which enables the connection between the physical product and its digital identity. 

All this information should be fed into a brand’s centralised data system. A traceability system allows brands to collect and organise data at various levels – item, batch, or model, for example. This is where standardised data is very important. Since data on the same shirt, for example, will be coming from both within a brand and among supply chain partners, it should be easily shareable. 

Once accessed, a DPP will include information on a product’s origins, material composition, supply chain, age, recyclability, and more – all compiled in one place for reference. 

Brands should first analyse what data on their own products is available to them and identify what is missing. Experts expect most standard DPP protocols to require data such as country of origin for both the materials and the product itself, information about a product’s composition, any certifications or compliance data, and age. 

Incoming regulations 

An update to the European Union’s Ecodesign for Sustainable Product Regulation (ESPR), enacted earlier this year, will require companies to provide a DPP connecting physical products to a digital identity with information on design, materials, and manufacturing. ESPR will first pertain to clothing, footwear, furniture, chemicals, and electronics, among other product categories. 

Thus far, no comparable regulation is in the pipeline in U.S. markets. However, ESPR will impact any company that sells its products in European markets, so many brands outside the bloc will have to comply anyway. Brands must start shifting towards this system as soon as possible to comply with regulations. 

“Start building digital twins of all aspects of their products,” says D’Souza.  “With 100+ criteria to report on, DPPs look deep into the supply chain and cover multiple aspects including harmful chemicals, climate change, supplier risk, forced labor and others. Data for this needs to be compiled from multiple sources within the company and its supply chain. This can take several years for large companies or complex products, so I recommend starting now.”

While no guidance has been released regarding the kinds of information required, we can turn to the EU’s DPP standards for electric vehicle batteries to get an idea. It will soon mandate that a battery’s DPP has information on its material sourcing, carbon footprint, percentages of recycled materials used, battery durability, and repurposing and recycling guidelines. 

Why they’re useful 

DPPs facilitate easier traceability and maintenance by providing readily available information on a product. One of the hardest processes when achieving circularity is recycling the product. A DPP provides detailed material composition data, allowing for more efficient sorting and recycling. 

“DPPs ensure better collaboration amongst product development, procurement, sustainability, compliance and engineering teams,” D’Souza tells CSO Futures. “As these teams all need to work together, they also need to reference the same data sources.”

Regardless of industry, DPPs can help brands differentiate themselves by enabling more storytelling and enhanced brand experiences throughout the customer journey. When a customer is considering a purchase, for example, a DPP can help verify its authenticity. Following a sale, DPPs can help demonstrate ownership and set the stage for ongoing customer engagement via loyalty programs, warranties, lost and stolen goods protection, and servicing, maintenance, and end-of-life options. 

DPPs can also allow brands to manufacture more efficiently and avoid overproduction by yielding greater inventory visibility. Research commissioned by Avery Dennison in 2022 found that overproduction and waste in the supply chain are reducing annual profits by 3.6%. 

As consumers pay greater attention to sustainability, they may increasingly seek details about a product’s origin, the materials used, and how it can be recycled or reused. DPPs can enable transparency into raw materials sourcing, circular principles, and waste stream trajectories, while simultaneously offering brands the opportunity to demonstrate their commitment to sustainability.

“The quicker you prepare for compliance, the smoother the transition will be for you and your customer group,” Nicolaj Reffstrup, co-founder of Ganni, said.