DPPs and blockchain - how can businesses prepare for upcoming EC regulation?

In recent decades of industrial growth, businesses raced to scale and prioritising growth above all else became the norm. But limitless growth is not sustainable, and there are other models of production that we must turn to. 

Enter the circular economy. In Europe, it is a key concept in plans to embed sustainability into regulation and lead the world in more eco-conscious systems of industry. Since 2020, when the European Commission’s ‘Circular Economy Action Plan’ was first introduced, there has been great progress, with additional proposals like the Ecodesign for Sustainable Products Regulation (ESPR) furthering the sustainable focus. At the heart of this regulation, and wider plans to create a circular economy, is the Digital Product Passport (DPP). 

A DPP is a digital record of a product's history, from the raw materials used in its creation, through its various ownerships, to servicing and repair. At each stage of the supply chain and lifecycle of a product, new information is added to its DPP, which can be accessed by relevant authorities, owners, and third parties to verify sustainability claims, reassure vendors and buyers of ethical sourcing, and uphold quality and authenticity of products. 

First approval of DPP regulation from the European Commission is expected in the next year or so, enforcing DPPs for industrial and EV batteries as soon as 2027, before approval of industry-specific policy rolls out to other sectors as soon as 2030. For businesses engaging in long-term planning, now is the time to start considering how they should deploy DPPs as part of their operations. 

Regulatory Considerations and Impact

The EU's current plan involves the battery industry being the first to adopt DPPs. Cosmetics, automotive, textile, and furniture industries are all in the EU’s plans, but the exact timeline for rollout and industry-specific regulation for each of these sectors are not yet clearly defined. Whether or not an industry is required to create DPPs by upcoming EU regulations, utilising DPPs regardless has a number of merits both operationally and reputationally. They can reassure customers of sustainability claims, ensure better oversight of supply chains, provide a verifiable audit trail for regulators and more. 

The regulation is also the same for companies of all sizes. Small to mid-sized enterprises especially may fear the financial and human investment involved with implementing Digital Product Passports. For this reason, they could face the greatest challenges once the regulation is enforced – or potentially, reap the largest rewards if they use their size to move more quickly than larger competitors. By proactively preparing for these changes, smaller businesses can potentially outperform their larger, slower-moving counterparts.

Another layer of complexity when it comes to implementing DPPs is the Ecodesign for Sustainable Products Regulation (ESPR). The ESPR sets the standards and criteria for the environmental performance of products sold within the EU, and it underpins the standards for DPPs. 

This means that businesses will need to meet a wide range of requirements including product durability, reusability, upgradability and reparability, carbon and environmental footprints, and recycled content, to name a few - goals set by the ESPR, but verifiable within a DPP. 

For example, a DPP can record the ‘repairability score’ of a product. If this changes over time as parts become outdated, then a customer can make an informed decision about whether to purchase the product, or check for information on recyclable and upgradable components to help dispose of an obsolete product responsibly, or bring it new life. The next buyer in the product's life cycle would be able to see which upgrades and repairs had been made, and check that they were carried out by a responsible, ethical company. In this way, the DPP can show how the ESPR has been enacted on a per-product basis, giving peace of mind to businesses and buyers. 

There are many overlapping, complementary pieces of regulation in the proposal stage, that will each help shape the final implementation of mandatory DPPs. By working with a partner who well understands Digital Product Passports and can help build flexible and adaptable solutions now, businesses can ensure they’re on the path to compliance before the regulation comes into effect. Once the details of how DPPs should be implemented are decided by the EU, many of these unknowns may fall into place. However, considerations such as data security, transparency, and trust should be planned for now, to avoid friction once the regulations are settled. Fortunately, there is a solution that makes these vital elements of DPPs simpler to maintain - using blockchain technology to improve the whole process.

Blockchain and Cloud-Based DPPs

The onus for creating and maintaining DPPs will fall to businesses along the supply chain. With so many touchpoints, how will the integrity of the data be maintained? How will customers be able to accurately trace when the DPP was updated, and who by?

One method of maintaining a DPP for businesses is to store the bulk of the information on cloud, passing responsibility for further updates to the next company in the supply chain to build a holistic picture. However, in this model, there is no guarantee that the data in the DPP has not been retroactively amended. And if there is no permanent, immutable record of when a DPP was updated or changed, its legitimacy is reduced, countering any perceived benefit to ensuring ethical, sustainable practices were embedded in each step of the product lifecycle. 

Blockchain Digital Product Passports overcome this challenge, as a hash of the data can be stored on the blockchain. Thanks to the immutable nature of blockchain, once the hash is recorded, future buyers and companies further along in the supply chain can verify that the information they’re seeing in the DPP has not been edited retroactively, helping reassure them that their suppliers have been compliant with EC regulation and their own ethical and sustainable standards. Because a digital product passport should be additive, with new information contributed at each stage rather than altered.

Use cases of blockchain like this help underline its value to businesses in the easy, secure, and transparent transfer of data. 

Preparing for the Future of DPPs

As we move closer to mandatory implementation of DPPs, the road might seem long and winding. There are certainly still questions that need answering, but the best time to start preparing is now - even with some decisions yet to be made, failing to prepare in advance and waiting until all answers are all clear could leave a business trailing behind. Regardless of the uncertainties, one thing is clear: DPPs represent the future of product accountability and transparency.

Blockchain technology, with its unique properties of decentralization, security, and immutability, stands as a promising foundation for this digital evolution. As businesses, it's our responsibility to stay informed, proactive, and flexible to adapt to these changes, seeking out experts who understand the landscape and can guide businesses through the introduction of DPPs.