EU Digital Product Passport marks unique business opportunity

With the upcoming Digital Product Passport, the EU is tightening the requirements for UK businesses when it comes to sustainability and transparency. But if you start preparing in time, it's a golden opportunity to get closer to your customers and gear your business for a more data-driven future.

While many companies have their noses buried in Scope 2 calculations, energy consumption and CO₂ baselines, it's easy to forget that another EU initiative - called the EU Digital Product Passport - is just around the corner and this will have at least as big an impact on UK companies as the ESG reporting requirement.

The passport is part of the EU's broader efforts to promote a circular economy, and it will place fundamentally different demands on how both subcontractors and original equipment manufacturers (OEMs) work with data and product design.

Battery manufacturers will be the first to get acquainted with the digital product passport - presumably in 2027 - but that's just the beginning. By 2030, it will affect every other sector of industry, and, for some companies, it could create major upheaval if they don't get started in time

You are accountable for each component

The digital product passport is an element of the EU's Green Deal to make Europe the first carbon-neutral continent by 2050 - a vision that is challenging considering each EU citizen generates 4.8 tonnes of waste per year.

The focus is to make the manufacturer of a given product accountable for recovering end-of-life materials, parts, and products. Therefore, the passport will follow the product through its entire lifetime and collect data on, for example, repairs, complaints, replacement of spare parts and other documentation.

This means that the manufacturer cannot escape responsibility for the product once it has been sold on, as the subcontractor is also accountable for the individual component.

A healthy exercise for many

There is no doubt that the implementation of such a passport obviously comes with some significant costs. My view is that if you get started in time, the benefits will far outweigh the disadvantages. And that's why companies should embrace the EU digital product passport rather than turn their noses up at it.

Firstly, it forces virtually all companies to consider how their raw materials are sourced and how to squeeze the most value out of their materials. This is undoubtedly a healthy exercise for many.

Secondly, the legislation will accelerate digital transformation - simply because firms will be forced to consider how they collect, store and disseminate their digital product data.

Thirdly - and in my view this is an important point that many overlook - the passport will naturally force industrial companies to design more with circularity in mind. For example, by designing their products to last longer and better, making it easier to remove valuable materials when the product is worn out or using more resource-friendly materials.

This, in turn, will pave the way for new business and revenue models, such as higher maintenance and service revenue and lower production costs.

But nothing happens by itself. And if you want a healthy and competitive business on the other side of 2030, it's important to avoid burying your head in the sand and hoping for the best.

It will require OEMs and suppliers to start designing their products with modularity and reusability in mind. Or to digitise your product data and processes so that you can use AI and advanced simulations to find the most optimal designs and production methods possible.

Therefore, get started now. Even if you feel you have your hands full with ESG reporting because one thing is certain…you won't have a profitable business beyond 2030 by continuing to refer to your 2020 baseline.

Elliot Clarke, UKI Regional Director of PTC