Digital Product Passport: What is it? (2024)

What is a Digital Product Passport (DPP)?

A Digital Product Passport (DPP) is a tool that provides information about a product's sustainability.

When customers scan a QR code on a product, they can see details about it, like what kinds of materials are used, the carbon footprint, how to repair the product, how to recycle the product, and how it was manufactured.

Required for products in Europe

New rules in the European Union will require products to have Digital Product Passports. These rules will have businesses provide more details on how eco-friendly their goods are.

The main idea behind these regulations is to encourage a "circular economy". A circular economy is one where products are used, reused, and recycled, rather than a linear economy where products are used once and thrown away.

Providing more details about a product's sustainability also helps companies avoid "greenwashing". Greenwashing is when companies dishonestly say they are helping the environment to impress customers, but their actual impact is small.

Greenwashing makes customers trust brands less, and brings negative press attention to their efforts.

Creating a sustainable economy

The E.U. wants to require Digital Product Passports to help solve some of the sustainability problems it's facing. These sustainability problems include some of the following: ¹

1. Inefficient use of natural resources
2. Adverse environmental consequences
3. Less reuse and recycling
4. Negative social impacts
5. Different approaches to sustainability in different countries

A Digital Product Passport allows different people in the supply chain, like manufacturers, importers, retailers, repairers, and consumers, to see information about a product. One of the benefits of this information is that it's easy to access, and simple to use. This can help these different people decide how to use, recycle, or dispose of different goods. The rules for Digital Product Passports are still being developed, but this guide can help you learn what a DPP is and how to get ready to use it in your business.

How does a Digital Product Passport enable a circular economy?

The idea of a circular economy is motivating the European Union to require Digital Product Passports for certain industries. ² According to the E.U.'s Circular Economy Action Plan, a circular economy is “where the value of products, materials and resources is maintained in the economy for as long as possible, and the generation of waste minimised”. In other words, products can be reused, repaired, and recycled in order to keep them useful, and avoid just throwing them away.

A linear economy, on the other hand, is more of a straight-line flow of goods through the economy. It starts with sourcing the raw materials, producing them into a product, and then selling them at a store. The customer purchases the product and then, after they’re done using them, throws them away. In contrast, a circular economy focuses on things people can do to keep goods useful for a long time.

One important thing to help customers have more transparency about a product is to provide good, reliable data about it. Collecting this data from the different groups in the supply chain is often the most difficult part of preparing a Digital Product Passport. When customers have product data that's easy to read, they can make decisions about which products they will purchase, and how they will reuse and recycle the goods.

Who is required to create one?

Part of the rules in the European Union is that the "economic operator" of a product needs to issue a Digital Product Passport. ³ An economic operator usually means the manufacturer of a product. In some cases, it could also mean the company that imports the product, a distributor, a dealer or a fulfilment service provider. ⁴

What are the benefits?

Different groups can benefit in different ways from added transparency about their products. People who buy products (consumers) are able to compare different products based on sustainability when they're making a purchase decision. After they buy a product, they can access more information about it in a Digital Product Passport. This information could include things like care and usage guides, repair information, and certificates of authenticity.

Companies that produce goods (manufacturers) can provide proof of sustainability claims. They can also gain more information about how customers are using the products. If a product turns out to have a problem, they can also better communicate with customers about recalls or repairs.

There are many ways that different groups can benefit from Digital Product Passports. The chart below summarises some of these benefits:⁵

How do DPPs enhance the business case for sustainability?

People are generally feeling positive about Digital Product Passports. The European Commission did a survey to study people’s thoughts on this idea, along with other sustainability regulations. More than half of the 626 people who responded to the survey were from businesses. And 68% of these business respondents think they should supply details about environmental impact in a Digital Product Passport⁶.

Most people, including consumers and environmental groups, want a Digital Product Passport to include information about a product's environmental impact, as well as social initiatives. This includes details about how a product is made, such as if workers were treated fairly and if child labour was involved. A large majority of consumers and environmental organisations feel it's important for companies to disclose this information in the passport. 88% of consumers agreed with including environmental information, and 85% wanted social impact info. Environmental groups were even more in favour, with 92% wanting environmental info and 90% wanting social info.

According to other surveys, using sustainability programmes makes business sense. When deciding what to buy, consumers are two to three times more likely to choose the most sustainable product option if everything else is equal. And these consumers will even purchase an eco-friendly product, even if it's slightly more expensive.⁷

What data do customers want to see in a DPP?

Recently, we conducted original research about Digital Product Passports of over 1000 people to find out what kind of sustainability info they would like to see. The results show they like the concept of a DPP, and focus on some areas they could benefit from when looking at this info.

When customers can easily find out how sustainable a product is through a Digital Product Passport, they are more likely to trust the brand and want to buy its products. Our study found that 73% of people feel more confident in a brand when they can see detailed sustainability information. Additionally, 67% of respondents said they would be more inclined to buy a product if they had access to this kind of information.

Top expectations for transparency: Recyclability and materials composition

The most important thing customers want to know about when buying a product is if it can be recycled, according to our survey. More than half of the people surveyed (56.1%) said that understanding recyclability makes them more likely to buy. Other important things for customers are knowing what materials are used (44.4%), making sure child labour was not involved (39.6%), and efforts to reduce waste (39.0%).

Consumers want to verify authenticity and sustainability claims

Customers are also asking companies to share more about how they are helping the environment. They want to know if the products are authentic (34.7%), to know if the products are really made in a sustainable way (33.7%), and to find out where they can recycle the goods (33.7%).

Preventing greenwashing

One important reason to have a Digital Product Passport is to prevent “greenwashing”. Greenwashing is when companies falsely claim to be environmentally friendly in their marketing to attract consumers, particularly younger ones like Millennials and Generation Z. It's a problem because these companies might not actually be helping the environment despite what they say. A DPP provides evidence that a company is doing what it says. When customers see that they're backing their words with action, they can trust the brand more.

Some companies have been hit with negative publicity about greenwashing. Delta Air Lines was served a class action lawsuit alleging that its carbon neutral claims were bogus. Evian Natural Spring Water faced a similar lawsuit about its carbon credits. And the maker of Nivea skin care products, French energy company TotalEnergies, and Dutch airline KLM, have all faced legal action over their net-zero claims. Even FIFA, the international football federation, had negative press about their statements.⁸

Companies can prevent greenwashing by using a Digital Product Passport. This tool helps customers see that what a company is saying about sustainability is backed up with evidence. Different people and groups can track a product's sustainability throughout its lifecycle, confirming if the brand's sustainability statements are genuine.

What is the E.U. DPP legislation?

The European Union rules that create the DPP concept have been worked on for a long time. They build upon several other environmental programmes that the E.U. has worked on in recent years, including:⁹

• The Ecodesign Directive - A 2009 law that regulates the design of energy-related products
• The Circular Economy Action Plan - A set of actions adopted in 2015 to transition the European economy from linear to circular
• European Commission’s 2020 Industrial Strategy - Lays out the vision for a ‘twin transition’ to climate neutrality and digital leadership
• The European Green Deal - A policy initiative approved in 2020 with the goal of making the E.U. carbon neutral by 2050

The European Union introduced a new proposal in March 2022 to combine different efforts that worked towards sustainability. The new rules expand on the 2009 Ecodesign Directive. Before, this Ecodesign Directive only controlled products related to energy. Now, the expanded legislation, known as the Ecodesign for Sustainable Products Regulation (ESPR), covers a broader range of items. It introduces the idea of a "Digital Product Passport" and plans for more detailed rules for different types of products in the future. These additional rules are called "delegated acts", and will be related to individual industries. The E.U. expects to have 18 additional delegated acts during 2024-2027 that companies will need to comply with.

Which industries need to implement a DPP?

Some industries are expected to require Digital Product Passports, based on how they align with a circular economy. The industries that are expected to require a Digital Product Passport include those outlined below.^{10 11} The first industry-specific rules have already been launched for batteries. Many people see this E.U. Battery Regulation as a preview as to how rules will unfold for other industries.

What is the timeline to implement?

The Ecodesign for Sustainable Products Regulation plans to create specific rules for different industries on how they can use Digital Product Passports.

What are the requirements?

The Ecodesign for Sustainable Products Regulation (ESPR) outlines the DPP concept, as well as some guidelines on what passports should contain. According to the proposal, the DPPs should be:¹²

• Interoperable with each other
• Long-lasting, even if a company runs out of money
• Able to preserve data authentication, reliability, and integrity
• Secure and privacy-compliant
• Traceable across the value chain
• Based on open standards
• Machine readable

The ESPR does not set specific rules for the Digital Product Passport. It expects future laws (the delegated acts) to outline industry-specific requirements for different sectors. These laws will cover details like:

• Product attributes. The product details to be included in the passport
• Data carrier. How a customer can access the DPP, whether it's through a QR code, RFID tag, or something else
• Product scope level. The level at which the DPP is applied to the product: to the product model, to product batches, or to individual product items
• Data access. How passport data should be accessed (publicly, or role-based)

Data carrier

A "data carrier" helps someone get access to the DPP. It usually is provided on the product itself (like on a hangtag, engraved on the item, or on a sticker). It could also be accessed on documentation or manuals that come along with the product.

The E.U. mentions some kinds of data carriers, like the following ones. Each product group will have data carriers based on the additional rulemaking over the next several years.¹³

• QR code. A QR code is a two dimensional matrix code that is scannable by smartphones. It is familiar to consumers, and easy to produce. A QR code can open a Web page that contains "Digital Product Passport" information.
• Barcode. A one-dimensional barcode is cheap to produce, but can trigger errors based on the quality of printing.
• Radio frequency ID (RFID). RFID tags are more expensive to use, but can contain more data - from 2 to 128 kilobytes. They are useful for machine sorting and require a special scanner to use.
• Watermark. A watermark is a nearly invisible tag applied to a product. They can contain specialized types of data. They are secure and not easily replicated, but require special scanners to be read.

QR Code	Barcode	RFID	Watermark

Out of these choices, QR codes are very common and simple for companies to make. People are generally familiar with how to use their smartphones to scan QR codes, and open Web pages that provide them information, like "Digital Product Passport" data.

Product scope level

The ESPR rules say that a "Digital Product Passport" can be applied to a product model, a product batch, or an individual product item. The additional rules that will come in the next few years will determine which scope is appropriate for each product group.

Product Model All the items of a specific product	Product Batch A group of products that share a manufacturing batch number	Product Item An individual product item

One note, as a DPP is applied to individual items, it becomes more difficult to coordinate the data for that product and associate it with the DPP.

Product attributes

The ESPR proposal states that providing more data about products can help people make better decisions. As the DPP rules become more detailed for different types of products, they will likely outline more specific requirements. The E.U. Batteries Regulation, for instance, specifies particular technical data that battery manufacturers should include in a DPP. The categories below can be used as a starting point for what information to include in a Digital Product Passport, along with any required details mentioned in a specific rule.^{14 15}

Data storage: Blockchain vs. cloud

The ESPR legislation permits a central registry to keep track of special product ID numbers linked to a Digital Product Passport, but allows companies to decide where to store the actual data. This arrangement ensures the DPP can adapt easily to business trends and innovations. This keeps DPPs “flexible, agile and market-driven and evolving in line with business models, markets and innovation”¹⁶

Companies can choose between centralized (server-based in the cloud) or decentralized (blockchain) data storage. Each of these data storage options has its strengths and weaknesses.

Cloud

In centralized models, product data is stored in a database accessible to users via the cloud. Pricing and usage models are well understood, but the transparency of the data is not easily verifiable.

Additionally, there is a risk of security breaches where hackers could access the database, or network outages that could take it offline. If a company goes out of business, it’s uncertain how the data will be preserved as required by law, since the company may not be able to pay for further data storage. If a technology provider goes out of business or is acquired by a company with different plans, data storage may become uncertain.

Blockchain

Decentralized, blockchain based models provide an alternative to cloud-based models. In a blockchain model, data is recorded on a public ledger, and cryptographically confirmed on the blockchain. Once entered into a blockchain, it is immutable and cannot be changed. It provides confidence that the data is secure and valid. Data on a blockchain is traceable, allowing people to view what product attributes were added by whom, and when.

Blockchain technology stores data in a decentralized way, spreading it across many connected computers. This helps make sure the data is reliable and reduces the risk of network issues. Another benefit is that information stored on a blockchain stays there permanently. Even if the company that first stored the data goes out of business, the data will still be accessible since it's duplicated on different computers. This feature is especially useful for following these new E.U. DPP rules.

Social impact attributes

Social impact reporting is not currently required. The E.U. has said it could re-visit including of social-related data eight years after the ESPR is officially written into law.¹⁵ Social impact programmes are popular among customers, with 85 percent of European consumers having a favourable opinion of seeing this kind of data in a DPP. ¹⁷

In addition, Generation Z consumers, born between 1990 and 2010, care a lot about social and environmental issues. They like to buy products from companies that care about the same things they do. They believe that businesses have the power to make a difference in society, and they prefer to support companies that support causes they care about.

They want businesses to responsibly use the resources they have access to. They also want companies to make products that are useful and beneficial to society.¹⁸ With buying power of "€360 billion" ¹⁹, Generation Z has the ability to influence how brands interact with them through sustainability and social-minded behaviours. Because of this, companies should consider including social impact reporting in their Digital Product Passport, including:

• Donations to causes aligned with company (e.g. reforestation, carbon removal, community programmes)
• Other involvement with causes (e.g. employee volunteering, mentorships)
• Employment safety disclosure and audit
• Fair wage disclosures and verification
• Fair labour certifications
• Employee working hours and conditions
• Employee safety and accident reporting
• Absence of child labour reporting and verification

Are blockchains sustainable and can they be used for DPPs?

In the past, blockchains used a lot of resources, but now they are more sustainable. A new type of technology in Ethereum-based blockchains, released in 2022, has addressed the concerns about how much energy they use.

The new way these networks confirm transactions, known as proof-of-stake, greatly reduces the amount of electricity used by the blockchain network. This method lowers annual electricity consumption by almost "99.988%" and decreases the network's carbon footprint by about "99.992%", as stated by Ethereum.org.²⁰ Other blockchains, such as the Polygon network, are not only clearing all the network's carbon debt since its beginning but also creating a process for going carbon-negative moving forward.²¹

Listen to a podcast about What is a Digital Product Passport?

What are Digital Product Passport examples?

Brands have been launching examples of Digital Product Passports to connect with their customers and demonstrate their commitment to sustainability.

Bon+Berg: Turnkey blockchain DPP

Bon+Berg

Dublin, Ireland

Bon+Berg is a company from Dublin, Ireland that creates eco-friendly women’s undergarments. It makes bras and bottoms using sustainable practices throughout their production process. The company promotes slow fashion and avoids greenwashing.

Bon+Berg uses PicoNext and the eco-friendly Polygon blockchain to securely store its sustainability information on a public record. This helps track data changes and ensures they stay available. To make information accessible quickly, the brand used a ready-made DPP viewer from PicoNext to display sustainability data from the public ledger.

The Morphbag by GSK: Cloud-based DPP

The Morphbag by GSK

London, England

The Morphbag, a fashion brand in London, makes vegan-leather bags like totes, handbags, and clutches for busy and fashionable women. They have certifications for their vegan products. They also audit their factories and plant trees in the Amazon rainforest for every handbag set sold.

The Morphbag made a cloud-based DPP in order to update sustainability attributes in its passport as its supply chain strategy evolves. With this setup, it has the option to use a blockchain-based solution in the future too. A pre-built, Web-based DPP viewer renders and displays sustainability data from the cloud, without customers needing to download or install any additional apps.

Simple Chic: Custom-branded DPP

Simple Chic

Sydney, Australia

Simple Chic is a women's clothing brand based in Sydney, Australia. It offers custom-made women's clothes made by local designers using natural materials. They also have services to recycle clothes before and after you buy them.

Simple Chic created a custom-branded DPP and makes it easily available for customers through a QR Code. With a custom-branded DPP, Simple Chic could retain full control over the brand and customer experience, ensuring that it complied with brand and sustainability guidelines.

Tammam: Product transparency with blockchain DPP

Tammam

London, England

Tammam is a couture fashion studio in London, England with a commitment to environmental and social responsibility. Its recent collaboration with the European Space Agency (ESA) features prints of landscapes affected by climate change through satellite imagery on its high-end scarves.

Tammam’s DPP is on a public ledger and traces the "fiber-to-finish" philosophy of its sourcing and production process for its new ESA scarves collection.

Authenticating products

Digital Product Passports can help brands and customers by making it easier to know if a product is real. By using a DPP to track a product's materials and how it was made, brands can see where the product came from. When brands give each product its own DPP on a public ledger (blockchain), they can prove that the product is really from their company. Verifying product authenticity, in fact, ranked highest among the benefits that consumers expect to gain from Digital Product Passports in our survey of 1000+ consumers.

When product information is saved on a blockchain, it is safe, unchangeable, and trackable. This allows people to know where a product comes from. Unlike paper or PDF certificates, customers looking at product information on a blockchain can trace each part of the product — like where the materials come from, how it was designed, how it was made, and more. This helps people understand the product's origins better, and gives customers more trust that they are buying a real product. In so doing, companies can better fight against counterfeit goods.

How can brands create a customer experience?

Digital Product Passports at first may sound like something for supply chain managers, but companies should also consider how to use them to improve the customer experience.

This customer touchpoint can also be important to provide brand content that helps secure lifetime customer loyalty. For example, in addition to product documentation included with a DPP, consider including inspirational brand content that helps customers envision how the product fits in with their lifestyle.

This point of contact can be used to show customers other things that could make the product better and deliver more revenue. For instance, you could offer service or maintenance plans, suggest other products to buy, or recommend rental or leasing options.

Blockchain-based DPPs provide new opportunities to connect with customers. People with a tokenized Digital Product Passport are recognised as product owners and may receive special benefits, exclusive offers, and access that others without this passport or those using centralized cloud storage cannot get.

Loyalty offers. Brands can push special perks, rewards, offers, and discounts to a tokenised DPP. These can include complementary products, service plans, discounts on future purchases, or special customer experiences. To access these perks, customers first verify they hold the correct token, and then are presented with a QR code or coupon code to redeem the reward. These rewards can be delivered to the end-customer over time, providing value to the customer and securing their loyalty.

Access Passes. Access Passes provide a grouping of rewards and benefits for the customer, either from the brand itself or from associated partners. As with the loyalty benefits, customers verify their token and then are presented with a QR code to access their reward.

Token-gated content. Holders of blockchain DPPs can present their token to access exclusive brand content and user communities. This content can include how-to content, tips and tricks, Q&A sessions with product managers, and other useful content.

Events. A public ledger DPP can also serve as an admission ticket to a digital or in-person brand event. Customers verify that they hold the correct token via a simple website, and then are presented with a QR code that admits them to an in-person event, or an access code for a digital event.

Social Impact. One of the benefits of a blockchain is that tokens and their associated actions are governed by a set of rules contained in a “smart contract”. These rules can be programmed to deliver social impact benefits as part of a brand marketing programme. For example, customers who access a DPP, or complete an action using it (like product registration) can trigger a blockchain donation to an associated non-profit or charity. A manufacturer of swim apparel, in this case, can include a donation to a coral reef restoration non-profit – closing the loop with both the product’s purpose as well as the company’s brand story.

Carbon Offset / Carbon Removal Transparency. For companies that engage in carbon offset or carbon removal programmes as part of their sustainability strategy, blockchain-based programmes can deliver transparency into the supply chain for these initiatives, verifying the actions that happen in pursuit of carbon neutrality. A blockchain can deliver transparency that actors in the carbon offset / carbon removal programme are doing what they promise, delivering assurance to the end-customer that their purchase is legitimate.

Should U.S. and global companies think about DPPs?

Supply chains are increasingly global and interconnected. The E.U. Digital Product Passport legislation specifically applies to companies who launch products into the E.U. market. However, the sustainability standard it sets promises to influence non-E.U. companies also.

Businesses should consider using DPPs now to make sure their products meet the required standards when working with suppliers and vendors worldwide. Following this model will also help companies be ready to enter the E.U. market in the future, giving them an advantage over their competitors.

GDPR: An example of E.U. legislation influencing other parts of the world

One recent example is the General Data Protection Regulation (GDPR) that came out in 2018. This law sets rules about how data should be protected and kept private for people in the European Union. Even though it's made for the E.U., many companies around the world choose to follow these rules. In addition, these rules also influence other national and state laws, like the California Consumer Privacy Act.²² One clear example of this influence is the common "Accept Cookies" notifications that pop up on websites now, even if they don't mostly operate in Europe.

What is the penalty for not complying with these regulations?

In the European Union, companies can be penalized for not complying with DPP rules. The ESPR legislation leaves it up to E.U. member states to create penalties that are "effective, proportionate and dissuasive". Countries can also consider the degree of non-compliance, as well as the number of affected product units. ²³

How can companies roll out DPPs in a strategic way?

Companies should begin preparing to implement DPPs. In order to gain internal support, get customer feedback, and test pilot projects, consider a three-phase model for implementation.

1 - Pilot. First, prepare for Digital Product Passports because it’s the right thing to do from a sustainability and social perspective. In this phase, consider identifying pilot products, gathering product data, and tokenising a handful of Digital Product Passports. Once the pilot projects have launched, see how the sustainability messaging resonates with your customers, employees, investors and other key stakeholders.

2 - Refine. Next, implement Digital Product Passports with the intent to better access Millennial and Gen Z audiences. These younger audiences value companies that share their values, and high on their list are those brands who espouse sustainability and social impact.

With your pilot Digital Product Passports launched, add a customer experience layer to engage users as they access your passport. In this phase, continue to test and refine your pilot Digital Product Passports to ensure a cohesive experience for customers.

3 - Scale. In the final phase, scale Digital Product Passport implementation in anticipation of impending E.U.-legislation. Or, if in a non-E.U. country, finalize implementation in anticipation of the eventuality of fast-follower legislation, such as the "California Consumer Privacy Act", which followed after the European Union’s "GDPR". In the prior phases you’ve initiated pilots, tested them with customer groups, and refined their implementation.

In this phase, expand the products you’ve included in your Digital Product Passport portfolio, by integrating with your product information management system or other enterprise workflow software. Continue to monitor usage, and use the Digital Product Passport touchpoint as a brand marketing touchpoint to communicate with your customers. Finally, plan for data assurance and governance by outlining audit workflows to ensure that your product attribute data is high-quality and accurate.

Using this three-phased approach, companies can develop internal learnings around their Digital Product Passport implementations to not only make sure they’re compliant with forthcoming legislation, but also to do the right thing in terms of environmental sustainability.

Get started

For more information on Digital Product Passports, see a demo of PicoNext.

Sources