Authors
Authors
Ashleigh Standen
Read time: 5 minutes
As consumers and regulators demand increasing transparency and circularity in the production and distribution of goods, digital product passports will be a key tool in supply chain management and optimization.
Technological innovations and future trends
What are digital product passports?
Products entering the European Union are required to demonstrate compliance with certain safety, health and environmental standards. Currently, positive demonstration of a product’s compliance with these requirements is largely achieved by labelling the product, shipping hard copy documents alongside the goods, or by keeping paperwork such as declarations of conformity on file or available on a manufacturer’s website. This can make it difficult to trace individual products from particular lots or batches and the information often lacks the immediacy and granularity that regulators and consumers increasingly expect. When certain products need to be traced or recalled due to defects or dangers, this lack of specificity can result in manufacturers recalling too much or not enough, with obvious consequences for their risk exposure and costs.
However, more sophisticated coding tools are coming into use, which makes the idea of a digital product passport (DPP) possible. The European Union describes DPPs as “a digital identity card for products, components, and materials, which will store relevant information to support products’ sustainability, promote their circularity and strengthen legal compliance”. In practice, a DPP will take the form of a data carrier like a QR code being physically applied to a product or its packaging that, when scanned, resolves to a web address where the manufacturer can store and update compliance and other information about the product. The EU is also concerned to ensure that “the digital product passport is flexible, agile and market-driven and evolves in line with business models, markets and innovation” and to this end “should be based on a decentralised data system and be set up and managed by economic operators”, but accessed centrally via a digital product passport registry.
Why are DPPs needed?
A suite of new regulations have been enacted or are being developed to help implement the EU’s Circular Economy Action Plan, which all require much higher levels of due diligence by participants in the market.
These include, for example:
- the Ecodesign for Sustainable Products Regulation (the ESPR) (which mandates the use of DPPs for in-scope products);
- the Corporate Sustainability Due Diligence Directive (which you can read about in detail in our article); and
- the EU Green Claims Directive.
There are also product-specific initiatives for textiles, construction products, batteries, detergents and toys, which mandate the use of DPPs.
For example, the proposed EU Battery Regulation stipulates that:
“In order to enhance transparency along supply and value chains for all stakeholders, it is necessary to provide for an electronic system that maximises the exchange of information, enabling tracking and tracing of batteries, provides information about the carbon intensity of their manufacturing processes as well as the origin of the materials used, their composition, including raw materials and hazardous chemicals, repair, repurposing and dismantling operations and possibilities, and the treatment, recycling and recovery processes to which the battery could be subject to at the end of their life.”
To this end, Article 65 requires that “By 1 January 2026, each industrial battery and electric vehicle battery placed on the market or put into service and whose capacity is higher than 2 kWh shall have an electronic record (“battery passport”)” and sets out the requirements for battery passports in detail. Details of the required supply chain due diligence schemes are set out at Article 72.
Being able to track and trace a product and its constituent materials by way of a digital identity card will be essential in this regulatory environment, where extensive due diligence is required. Interoperable DPP data standards – such as those being developed by standards organisations like GS1 – would allow a company at one stage of the chain to clearly communicate the necessary information to its upstream and downstream partners, and allow regulators to access the details they need to assess supply chain compliance.
What will DPPs contribute to the supply chain?
DPPs have the potential to fluidify and strengthen information available to end users, to increase supply chain circularity, and ultimately to facilitate and streamline compliance by manufacturers.
According to the ESPR:
“…the digital product passport is expected to help customers make informed choices by improving their access to relevant information, allow economic operators, namely manufacturers, authorised representatives, importers, distributors, dealers and fulfilment service providers, and other value chain actors, such as customers, professional repairers, independent operators, refurbishers, remanufacturers, recyclers, market surveillance and customs authorities, civil society organisations, researchers, trade unions, and the Commission, or any organisation acting on their behalf, to access, introduce or update relevant data, and enable competent national authorities to perform their duties, without endangering the protection of confidential business information.”
The ESPR’s requirement for DPPs is expected to come into force via delegated acts in mid-2027, so those companies and products that fall within scope will have time to prepare. However, given the extent of the due diligence required, market participants would be well advised to start preparing early. In some cases, DPPs will be mandatory much earlier – again taking the battery passport as an example, from 1 January 2026.
Companies that fall below the thresholds in the regulations but who do business with in-scope entities will almost certainly be asked by their in-scope business partner to support that partner’s compliance with them. This will likely take the form of contractual requirements to identify, monitor and address adverse environmental and human rights impacts and, hence, the regulations may be expected to have a waterfall effect. The practice of mandatory supplier human rights and ethical business policies, which is already significant, is likely to increase, with significant incentive for in-scope entities to make these policies contractually binding and non-negotiable.
The regulations (and innovations like DPPs) will likely set a benchmark for other non-EU jurisdictions and regions, which may follow the EU's example and adopt similar or compatible legislation. Businesses wanting to keep abreast of the potential future impacts should maintain a watching brief for similar developments in countries in which they trade and consider how it may affect their international operations and supply chains.
Authors
Authors
Ashleigh Standen