Digital Product Passports (DPPs) are best known for their role in the luxury goods market, where they enhance credibility and address issues such as counterfeiting and theft. However, their applications extend far beyond this, particularly in sustainable finance and supply chain sourcing.
Our latest horizon-scanning piece explores how DPPs are transforming supply chains by improving traceability and accountability. The science of supply sourcing has largely evolved from systems-based thinking, understanding the journey of the products and services we deliver and encompassing ESG principles, which assess environmental and social impacts while ensuring robust governance.
What is a DPP?
A DPP is akin to a travel history and, in some respects, a list of components that make up a recyclable product. It is designed to reduce waste and promote a circular economy. Just as we receive stamps on our passports when we travel, so too does the product. This gives us insight into the supply chain and its carbon footprint, offering a detailed history of its journey from production to disposal.
The science of supply sourcing largely stems from systems-based thinking, understanding the journey of products and services and ESG principles, which focus on managing environmental and social impacts while ensuring robust governance.
As sustainable finance and responsible supply chains gain prominence, understanding the latest innovations is critical. By establishing environmental and social accounting practices, businesses can align with best-practice frameworks, such as the United Nations Sustainable Development Goals, which promote a more sustainable world.
Practical Applications of Digital Product Passports
Digital Product Passports have vast potential in the circular economy, offering solutions such as:
- Circular Economy: Consumers scan a QR code or NFC (Near Field Communication) tag linked to a DPP, providing detailed recycling instructions.
- Upcycling: DPPs can include repair guides to encourage product upcycling and extended lifespans.
- Sustainability Credentials: Transparency in carbon footprint, material sourcing, and ethical supply chains enhances consumer awareness and corporate responsibility.
Battery Passport and the Global Battery Alliance
In 2020, the concept of the Battery Passport was first publicly launched at the World Economic Forum’s 50th Annual Meeting by the Global Battery Alliance (GBA), a multi-stakeholder alliance that includes over 110 international organisations, including Everledger. This initiative marks a significant step toward improving sustainability within the battery industry, ensuring transparency in supply chains, and supporting circular economy practices in the context of battery production.
EU Mandates for Digital Product Passports
The European Union is on track to mandate Digital Product Passports under the Ecodesign for Sustainable Products Regulation (ESPR). While a hybrid approach (on and off blockchain) is likely, IOTA, a scalable and fee-less distributed ledger, is collaborating with the European Blockchain Services Infrastructure (EBSI) to develop blockchain-based DPP solutions.
Who is Within Scope?
By 2027, businesses producing batteries will be required to implement Digital Product Passports. By 2030, DPPs will be mandatory for:
- Batteries: Tracking lifecycle from production to disposal.
- Textiles: Ensuring transparency in sourcing, manufacturing, and sustainability.
- Electronics & ICT: Providing insights into material use, energy efficiency, and recyclability.
- Construction Materials: Verifying sustainability credentials for greener building practices.
- Furniture: Offering clarity on material origins, chemical use, and recyclability.
- Tyres: Enhancing tracking of composition and end-of-life disposal.
- Toys: Ensuring compliance with safety and environmental standards.
- Plastics: Supporting recycling and reducing pollution.
- Chemicals: Providing transparency in composition, hazards, and lifecycle management.
- Detergents & Paints: Encouraging safer, more sustainable formulations.
- Lubricants: Ensuring proper lifecycle management and eco-friendly disposal.
The Future of Digital Product Passports
The European automotive industry, in particular, is at a turning point. While some firms may lag in adopting blockchain-based DPPs, regulatory pressure and market demands will inevitably drive broader adoption. The convergence of DeFi and Digital Product Passports is an emerging trend that cannot be ignored.
Although blockchain technology is not yet widely used in sustainable finance reporting, its potential to enhance transparency and accountability remains vast. Over the next 25 years, we can expect Digital Product Passports to become a standard tool in sustainable reporting, reshaping industries and reinforcing global ESG commitments.