Are you prepared for Digital Product Passports?

Are you ready to provide your customers with detailed batch and component-level traceability information, which they can then share with their own customers? Regulatory changes are on the way which will empower consumers to make ethically-informed choices at the point of purchase. Richard Lewis at InspireXT takes a trip around Digital Product Passports.

Starting in 2027, the European Union (EU) will require the adoption of Digital Product Passports (DPPs) for goods made, transferred or sold within the EU. This legislation, part of the Ecodesign for Sustainable Products Regulation (ESPR), aims to enhance transparency across product value chains by providing detailed information on product origin, materials, environmental impact, and disposal recommendations.

DPPs will facilitate easy product identification, comparison, and traceability, requiring a new level of data sharing and rigour between manufacturers and retailers. This initiative is a significant component of the EU Green Deal’s Circular Economy Action Plan (CEAP) and reflects a broader global trend towards similar regulations, such as the ‘Made in USA’ standard, DEFRA’s food labelling standards, and the Drug Supply Chain Security Act (DSCSA).

The ESPR seeks to establish sustainable products as the standard by promoting lower energy consumption, extended product lifespans, ease of repair and reuse/repurposing, reduced use of harmful substances, improved recyclability and higher recycled content. It also aims to lower the overall carbon and environmental footprint, driven by mandated consumer visibility and demand. Additionally, the regulation prohibits the destruction of unsold products, starting in 2026 for large companies and 2030 for medium-sized ones.

This article aims to explore various aspects of DPPs, including their practical applications, benefits from multiple perspectives, and the practical considerations and steps involved in their implementation.

How will DPPs be used in practice?

The core principles of DPPs encompass traceability, sustainability, and transparency at the component level for each product batch. This Bill of Materials (BOM) visibility will be linked to the finished product through a 2D barcode that combines both the item ID and batch ID (and potentially a serial ID, where applicable). These identifiers will be delivered via a QR code or RFID/NFC chip, typically attached during the packaging or labelling process.

DPPs are expected to vary in format and detail depending on the industry and market segment. Most DPPs will likely include a product description, the GTIN (Global Trade Item Number), GS1 information, Commodity (HS) Codes, production location and certification details, and country of origin information. Additionally, the displayed information will be influenced by industry-specific considerations, such as product attributes, transportation details, carbon footprint, water usage, recyclability, and ownership information, including details for components within the finished product. DPPs may also feature reparability information or the availability of spare parts. This information may be used by production teams, customs officials, sales channel partners, service teams, and end customers.

The transition to 2D barcodes brings numerous advantages, prompting GS1, the custodians of global product codes and data standards, to retire EAN barcodes in favour of 2D barcodes. This change will include the establishment of a register of 2D barcodes, a consistent number format, and a resolver service that redirects scans to the 2D barcode provider’s website.

How will brands drive value from implementing DPPs?

While DPPs will undoubtedly introduce complexity and cost (which we will explore shortly), they also offer numerous benefits for those who can embrace them. These include:

• Branding and communication: DPPs can enrich the product story and create new levels of brand engagement by showcasing efforts in selecting suitable suppliers and reducing environmental impacts. DPPs provide an additional touchpoint to communicate brand values beyond packaging, websites, and in-store experiences.
• Differentiation: While DPPs are currently used mainly by niche players, this is changing. There is an opportunity to differentiate offerings through exceptional traceability information, building customer confidence. As DPPs become more widespread, those with greater experience and maturity in offering these will likely retain a competitive edge.
• Establish direct-to-consumer relationships: Originating the 2D barcode allows customers to be directed back to the brand’s own web channels, integrating them into the brand’s customer journey.
• Customer loyalty: Reliable traceability information can help organisations build trust, leading to greater loyalty and increased repeat purchases. Customers are increasingly skeptical of ‘greenwashing’ and prefer brands that treat their suppliers, partners, and customers fairly while communicating openly about their practices.
• Targeted recall: Batch-level tracking enables pinpointing of quality issues, allowing recalls to be specific to directly impacted batches.

For customers, benefits may include:

• Informed purchasing decisions: Today, traceability information is often opaque, making it challenging to evaluate one product relative to another without extensive research. DPPs enable consumers to make more informed purchasing decisions and easily compare alternatives.
• Deeper understanding of products: In a world where many are ‘buying less, but buying better,’ the ability to intentionally select products that are thoughtfully made and designed to last is a significant advantage.
• Clarity on repair, warranty, and end-of-life: DPPs provide clear information on product or packaging repair, warranty, and end-of-life options, improving product longevity and recycling impact. This transparency can also support higher resale prices by providing confidence in the product’s authenticity. Additionally, ownership can be linked to the blockchain and transferred upon sale.

In which industries do we anticipate the greatest activity?

While the finalisation of the EU regulations is pending, much is already clear. The EU has indicated that there will be a phased rollout by industry, with fashion, furniture, and batteries expected to be the first affected categories starting in 2027. However, large grocery retailers are also recognising the significant changes required in their supply chains to transition to 2D barcodes and are actively piloting this capability ahead of the introduction of food passports. Although the exact data standards are not yet finalised, it is anticipated that, similar to how GDPR has set the global standard for personal data, the DPP regulations will establish the global standard for product data.

There is already significant excitement surrounding DPPs, with new information emerging almost weekly (GS1 is a particularly valuable source). The impact and use cases will vary by industry, as will the level of preparation required. For example:

• Luxury goods: DPPs enhance brand legitimacy and credibility by providing transparency about product origins and fair treatment of partners. For brands emphasising the country of origin (e.g. Made in Italy), DPPs offer a natural medium to provide detailed insights and build consumer confidence, including component-level information. They also enable traceability for multi-sourced components, reinforcing brand value through individual batch tracking.
• Configured products: Configurators have gained popularity, allowing customers to customise and purchase products online. DPPs can display detailed information about the selected configuration, which is particularly useful for repairs or servicing.
• Highly regulated industries: Industries like pharmaceuticals, which already maintain detailed traceability for compliance, can leverage DPPs for end-to-end batch tracking, combating drug counterfeiting, and providing consumer confidence.
• Consumer chemical manufacturers: Producers can use DPPs to display information on safe and sustainable disposal of products at the end of their life cycle. The 2D barcode addresses the challenge of limited label space for necessary consumer information. Additionally, DPPs offer batch and lot-level traceability, supporting quality reporting, investigations, and targeted recalls.

What are the key factors for operating DPPs at scale?

You may have already noticed DPPs appearing, particularly among smaller and niche brands. Earlier this year, Tesco became the first major retailer to launch DPPs for their F&F clothing range. These early adopters often start with a subset of their product range to test and refine the information included. While manual data preparation may be feasible for a small number of similar products, it is not a viable option at scale. Therefore, a systems-led approach is essential, and firms should consider:

• Product data: Is the existing product data sufficiently rich, accurate, and reliable for use in DPPs? Do we have a data standard that enables timely exchange throughout the supply chain?
• Supplier information: Is our supplier data in the procurement system purely transactional, or can it be enriched to provide more detailed insights?
• Tag generation: Will we need to update our packaging or product leaflets to display a QR code granting access to the DPP, or will we generate tags to attach to products?
• Digital display: How can we pull data from multiple sources into an autonomous system for easy display on a web page for the DPP?
• Sourcing: Can we isolate batch-level components within our manufacturing process to provide detailed information to our customers?
• Sustainability: How can we determine the carbon footprint and water/chemical usage by node and route within the supply chain?

What are the potential challenges?

Our observation is that one of the greatest perceived challenges for DPPs is increased cost and complexity. During this period of a ‘cost of living crisis,’ adding excessive additional activities and passing these costs on would be unpalatable for producers, brands, retailers, and customers. Addressing these challenges requires a proactive approach, engaging product teams and packaging providers collaboratively to identify efficiency savings that can offset the costs.

Another challenge is verifying the data entered across the supply chain. Several third parties are emerging to provide verification services, augmenting existing audits and certifications, and streamlining the effort required to maintain this verification.

A further challenge is the need to provide visibility into one’s own supply network, which has often been closely guarded for competitive reasons. How the regulation will handle this remains to be seen in the coming months.

The scale and complexity of data, especially for organisations creating complex products with many sub-components, cannot be underestimated. Developing a product data strategy and effective governance processes is becoming a board-level issue.

Additionally, ensuring the immutability of product data is crucial for building confidence in its authenticity and ensuring its survivability beyond any one organisation. There is ongoing debate between centralised versus decentralised DPPs and the role of blockchain. Our view is that organisations already hold much of the data internally and should control this within their corporate system architecture, while also being able to publish the DPP to the blockchain and consume existing data from the blockchain to verify steps within the overall supply chain.

These challenges are not trivial. However, one must not forget the impact of customers in driving transformational digital changes, especially when aligned with environmental concerns. Industry veterans remind us that barcodes were initially met with scepticism in the 1970s, with many unable to see the value of taking up valuable pack and label space. The EU’s committed circularity objectives and rising consumer demands are anticipated to necessitate addressing these challenges, supported by organisations such as GS1, consumer-marketing-driven enterprises, and consulting and software vendors.

How can organisations get started?

Readiness for the upcoming changes will likely vary by industry, operation scale, and individual organisations. This section outlines steps that sellers and manufacturers can take to ensure their organisations are well-prepared.

Step 1: Master data maturity assessment: In this phase, an organisation seeks to understand the extent to which its product data is complete, robust, de-duplicated, and governed by strong practices. Leading organisations typically manage product data in a central repository (or hub) that disseminates information to downstream systems such as manufacturing, procurement, marketing, sales channels, and CRM systems. By assessing current maturity, organisations can develop a roadmap to effectively navigate potential challenges.

Step 2: Traceability gap analysis: Products and components should be traceable to their original country of origin and supplier (where applicable). This data can be complex, especially with extensive BOMs and significant variability at the serial number level. Information can vary for each production batch, as raw materials or components may come from different suppliers or countries of origin. For example, a manufacturer of diamond-tipped drills might source diamonds mined in Namibia, polished in the Netherlands, and cut in France, resulting in a complex value chain. In such cases, particularly with high-value products and components, firms often use blockchain-based technologies to ensure reliable information management.

The Traceability Gap Analysis helps organisations understand the maturity of their product traceability management.

Step 3: Creating a vision and roadmap for the digital product passport: The details in the DPP will not be ‘one-size-fits-all’ and will likely depend on the product type. In this step, organisations seek to understand the data to be displayed based on the intended uses and identify any pain points linked to the assessments performed in Steps 1 and 2. Many will opt for a phased approach, starting with simpler products to test and learn before scaling across all product lines.

Final thoughts

Digital Product Passports will soon become a requirement, and organisations can gain a competitive advantage by taking proactive steps to prepare ahead of time. The scale of the challenge will depend on the complexity, depth, and volume of product data, necessitating a well-developed plan to meet these demands. Embracing DPPs early not only ensures legislative compliance but also enhances customer journeys and streamlines product-related processes. When considering when to start a readiness assessment, the old adage holds true: if the best time to start was yesterday, the second-best time is today.

This article is part of a five-part series developed by InspireXT, whose team of supply chain experts can help you stay ahead of the curve and introduce DPPs into your organisation. With extensive knowledge and experience in providing advisory services and implementing solutions in product traceability, master data management, and supply chain management, the team works closely with clients at every step of the journey. For DPPs, InspireXT offer briefings and readiness assessments to help you get started.