By Stefan Sipka, European Policy Centre
One of the most significant challenges to achieving a CE is inadequate or even lacking information transfer between different stakeholders across value chains. An unexploited tool for addressing this challenge is digitalisation – namely, data and digital solutions –, as part of the broader green and digital transitions under the European Green Deal.
One digital tool that deserves special attention is the digital product passport (DPP). While general awareness and knowledge of the DPP remain limited, the ongoing developments could provide strong impetus for a CE. On 30 March, as part of a new legislative package on the CE, the EU launched the Sustainable Products Initiative (SPI), setting the stage for the wide-scale introduction of DPPs. Having an overarching policy framework on DPPs is important to improve information transfer between the relevant stakeholders, be they public authorities, companies, consumers or civil society actors.
Digital product passports and the Sustainable Products Initiative
DPPs can be valuable tools for enabling quick and convenient access to and sharing of product-related information. By scanning the tag (e.g. QR code), producers, consumers, waste operators and law enforcement agencies can easily access and possibly also upload relevant and targeted information for other stakeholders. This would come with multiple benefits. For example, easy access to information could empower consumers to purchase more circular products or inform repairers on how to fix used devices.
Several challenges to introducing DPPs to the EU market remain. Finding a balance between information-sharing and protecting personal and corporate data is not easy. If convincing and applicable business cases for information transfer are lacking, corporate interest in DPPs is hampered. A lack of funds or skills may prevent small and medium-sized enterprises (SMEs), start-ups, waste operators and consumers from using DPPs. Policy interventions to facilitate the scale-up of DPPs can help address these challenges.
The SPI builds on the 2020 Circular Economy Action Plan and proposes a regulation that would oblige manufacturers to introduce DPPs, as part of general ecodesign requirements for certain products. It envisages that DPPs would inter alia be coupled with unique product identifiers (i.e. codes akin to a personal identification number) and data carriers (i.e. tags); include rights to access, introduce, modify or update the information; and be interoperable with other DPPs to enhance information transfer. The information in the DPP shall be based on open standards, interoperable, machine-readable, structured and searchable.
The SPI will set an overarching policy framework to be followed by delegated acts to determine specific rules, including on DPPs, for different types of products. The products to be covered will be laid out in the European Commission’s three-year working plans and depend on additional analyses and consultations with the relevant stakeholders. Electronics, textiles and furniture are expected to be the most important categories the Commission will address, building on its pilot work on DPPs for batteries.
Where to go from here?
The proposed regulation provides a solid basis for the wide-scale introduction of DPPs. However, further improvements to the current proposal should be considered. It does not make any (strong) reference to achieving greater economic resilience in light of Russia’s invasion of Ukraine. It envisages applying factors like the environmental impacts of products, or their volume of sales and trade within the EU, to determine which products will have ecodesign requirements and thus for which DPPs will apply. But the presence of valuable materials is not directly mentioned as a factor, despite such criteria being important to ensure that products with valuable materials are retained in the economy to reduce the EU’s dependence on unreliable partners on the global market. The proposed regulation should be closely linked with the EU’s agenda on critical raw materials.
The environmental impact of products should be determined via lifecycle analyses to determine which products should be covered by delegated acts. The Product Environmental Footprint (PEF) is the EU’s methodology for standardising calculations on the environmental impacts of products. However, as of yet, it has only been applied to pilot projects. The EU must speed up the development of PEFs to enable the systematic and transparent calculation of products’ environmental footprints. PEFs would help identify the most relevant products to be covered under the ecodesign requirements and which would need DPPs.
DPPs for the CE are as good as the information shared via these tools. Not all information is important to all stakeholders, and the relevant information must be made available in a user-friendly manner. Businesses need to understand why they should share information via DPPs. Conversely, the EU should not put an unnecessary administrative burden on businesses regarding data disclosure and reporting.
For example, the SPI envisages establishing public registries of product information. These registries should be designed to add value to policy monitoring and law enforcement and avoid unnecessary costs for European industry in terms of reporting. The proposed regulation envisages creating an ‘Ecodesign Forum’ to discuss potential ecodesign requirements with the relevant stakeholders (e.g. industry, environmental protection groups, consumers). The EU must use this forum to discuss the inclusion of relevant and user-friendly information in DPPs.
The balance between data sharing and data protection must be ensured, and the competitiveness of the EU’s industry not compromised. Data security is ever more relevant now due to the geopolitical tensions triggered by Russia’s invasion of Ukraine (e.g. cybersecurity breaches). The right to access data must be clearly established in the delegated acts to distinguish between different companies, consumers, NGOs and public authorities. The EU should make the most of decentralised data-sharing solutions (e.g. blockchain) that allow companies to maintain control over their data. It should also support the development of cloud-based data solutions to allow companies (e.g. SMEs, start-ups) to pool their data together.
The SPI needs to be closely intertwined with other initiatives under the EU’s digital agenda. The European Commission is working on common data spaces to improve information transfer and facilitate the introduction of DPPs. These efforts include a data governance framework and data infrastructure to ensure data quality and interoperability and offer cloud-based solutions. The Data Act and Data Governance Act are crucial legislative pillars for data spaces and sharing. Completing the common data spaces will take years, but they are imperative to ensuring that DPPs work and must be accelerated as much as possible. The SPI does not reference the Commission’s work on data spaces; the EU should make clear interlinkages between the two.
The EU’s efforts under the SPI should be coupled with financial instruments to boost the development and uptake of DPPs. For example, the Horizon Europe and Digital Europe programmes can support researchers and start-ups to innovate in this field. InvestEU can also scale up data-sharing solutions, especially for SMEs.
Lastly, the EU’s work on DPPs must go hand-in-hand with the global efforts to develop standards for these digital tools, such as those of the GS1. The EU should look for alliances with like-minded governments and lead the global uptake of DPPs. It should also utilise fora like the UN, Organisation for Economic Co-operation and Development, G7, G20 and EU–US Trade and Technology Council to promote the global uptake of DPPs.
Strong start for the long way forward
DPPs will support the EU’s climate and environmental ambitions significantly and help make the European economy more resilient. The SPI is a landmark step towards including DPPs in products on the Single Market and could provide further incentives at the global level. Notwithstanding its high potential, the SPI is only the start of the journey towards having fully traceable products with the help of DPPs. The EU must ensure, in collaboration with all the relevant stakeholders, that DPPs are integrated into the products most relevant for its transition to a CE while safeguarding the competitiveness and resilience of the EU’s industry.
Stefan Šipka is a Policy Analyst in the Sustainable Prosperity for Europe programme at the European Policy Centre.