- Published on: 05.01.2022
- 4:17 mins
The Digital Product Passport
Just a Statutory Requirement or an Enabler for a Circular Economy?
The German coalition agreement between SPD, Bündnis 90/Die Grünen and FDP is a good example of how important the digital product passport is for the implementation of a circular economy:
The agreement states that the German government plans to introduce digital product passports, support companies with the implementation process, and uphold the principle of data minimization, making it clear that digital product passports are viewed as part of a national circular economy strategy. In its strategy papers entitled “A European Green deal” and “Circular Economy Action Plan,” the European Commission identifies the digital product passport as an essential tool for developing an environmentally friendly and resource-efficient economy. Clearly, we can expect these political declarations of intent to eventually evolve into genuine legal requirements. As we head into 2022, the new EU Batteries Regulation is likely to be the first example to set a precedent. Yet even beyond the political sphere, the topic of developing a circular economy is gaining momentum. In line with their sustainability strategies and in particular the focus on sustainability within supply chains, companies are paying much more attention to sustainable procurement, and using sustainability indicators as award criteria. According to the latest “Global Sustainability Study 2021,” sustainability is also a key factor in purchasing decisions for around three-quarters of private consumers in Germany. With these things in mind, it is easy to create a relevant business case for providing sustainability data in a transparent way.
A holistic view of a product
The digital product passport plays a key role in all of these discussions because it contains a wealth of data about a product and is continuously updated over the product’s life cycle. Material master data, material composition data, sustainability data such as life cycle CO2 emissions, utilization data such as disassembly instructions, and safety information can all be recorded, providing a complete picture of a product that is useful to various internal and external user groups. Typical internal stakeholders primarily include members of Compliance, R&D or Business Development teams who need the data to fulfill regulatory requirements, optimize product development or adjust the company’s strategy. External stakeholders primarily include suppliers who must disclose their own data and, more importantly, wish to use their sustainability credentials as a selling point. The data is also useful to customers who are trying to make sustainable purchasing decisions, repair companies who aim to extend the product life cycle, and remanufacturing or recycling companies who benefit at the end of a product’s life cycle. In principal, a digital product passport can be created for any type of product but we can assume that this electronic document will initially be established for products that require a lot of resources and energy to produce, and that have a highly complex material composition. High-voltage batteries installed in electric vehicles are a good example, and one that is now subject to the EU Batteries Regulation.
Because only when there is clarity can they be sure that their efforts are also purposeful.
All of this sounds incredibly positive and many companies are keen to take action but making progress is currently very difficult. Political institutions may have this issue on their agenda but a concrete definition of standardized requirements is yet to materialize. This ambiguity is problematic because creating a digital product passport requires companies to combine, aggregate and then deliver user-centered data from various sources. Doing this within your own company is no easy task since not all of the data is readily available – and this is especially true of sustainability data. When you start gathering data from further afield, this task becomes incredibly challenging. Many companies are therefore calling for a shared approach to developing a standard for digital product passports and are already working on specific proposals. After all, clarity regarding expectations is the only way to ensure that their efforts are productive.
Despite this unsatisfactory situation, any company can still take meaningful action right now. Every business, but especially small and medium-sized enterprises, needs a lean and functional implementation concept to manage the effort that goes into collecting and aggregating data. We therefore recommend that you forge ahead with your initiatives for implementing a digital product passport. We suggest using our seven-stage process model to structure your activities:
1. Requirements analysis
Analyze current and future relevant legal requirements and derive both functional and non-functional requirements for your digital product passport.
2. User centricity
Identify the data needs of your relevant user groups through interviews, user journeys, or hypotheses to be tested. Establish use cases, consider the potential impact on your business case, and define relevant metrics. Validate your assumptions through direct conversations with your user groups.
Based on your findings from the iterations with your user groups, you conceptualize the target state of your digital product passport. Create a data model, architecture, and user-friendly user interfaces. Identify existing data sources and attributes and find a suitable implementation environment.
After you have completed your conception of the digital product passport, start with a pilot based on your findings and hypotheses. In an iterative procedure, integrate various data sources, aggregate data, and use it to conduct a multi-stage technical test. Compare qualitatively and quantitatively different approaches and technologies.
Based on the results of the pilot, you can further develop the digital product passport technically in a targeted manner, embed it in your IT infrastructure and make it available to the first user groups.
Develop a roadmap for scaling your digital product passport. Identify relevant platforms, consortia, and overarching partners. Analyze further use cases for the deployment of your digital product passport and leverage the resulting potential to optimize your business cases.
Find a suitable long-term operating model: whether on your own corporate infrastructure, on cloud platforms or with third-party providers such as MHP - end-to-end reporting and continuous improvement processes are essential for sustainable operation.