Digital Product Passport

1. Introduction to the Digital Product Passport

The Digital Product Passport (DPP) is a digital solution containing detailed information about a product throughout its entire lifecycle, from raw material extraction to recycling or disposal, promoting transparency, sustainability, and the circular economy (European Commission). This concept gained traction with the European Green Deal, launched in December 2019, as part of the European Union's (EU) effort to reduce the environmental impact of products and create a more sustainable economy.

In 2020, the EU’s Circular Economy Action Plan was published, highlighting several initiatives aimed primarily at extending product lifespan and promoting practices like reuse, repair, and recycling. Within this context, the DPP was identified as a key solution to enhance product traceability and improve information flow along its value chain.

In 2022, the EU’s proposal for the Ecodesign for Sustainable Products Regulation (ESPR) officially laid the foundation for DPP implementation. This regulation aims to ensure that all products marketed in the EU are designed more sustainably, focusing on energy efficiency, durability, and recyclability. Within this regulation, the DPP is seen as a key tool to provide detailed information on the environmental performance of products, helping consumers, businesses, and regulators make more informed decisions. Moreover, the DPP also seeks to give end-users greater control by ensuring they have access to clear and comprehensive information about the origin, composition, and environmental impact of the products they purchase.

The DPP is highlighted as one of the most promising initiatives by the EU to enable the transition to a circular economy, and its development is crucial for ensuring supply chains are more transparent, sustainable, and resilient.

Figure 1 - Reference to the PDP by the EU over time

2. Key Application Sectors and Benefits of the DPP

The DPP is being adopted across several strategic industries, particularly those facing significant sustainability and traceability challenges. Some of the pioneering sectors in DPP implementation include the battery sector, the fashion and textile sector, and the electronics industry. The application of the DPP in these sectors reflects its potential impact on the circular economy, enabling more efficient resource management and improving the environmental performance of products

2.1 Battery Sector

With the DPP, it is possible to monitor the usage conditions of each battery and facilitate the efficient recycling of its components at the end of its lifecycle. This is especially important considering European Battery Regulations, which set ambitious targets for material recycling and reuse. Moreover, by providing detailed information about battery composition and performance, the DPP enables manufacturers to improve design processes, promoting longer-lasting, more efficient, and easier-to-recycle batteries.

The battery sector is at the heart of the clean energy transition, especially with the growth of electric mobility and the expansion of renewable energy. However, battery production involves the use of critical materials like lithium, cobalt, and nickel, whose extraction and disposal pose serious environmental and social challenges. The DPP offers an effective solution to increase battery traceability, from the mining of materials to their manufacturing, use, and eventual recycling or disposal.

Figure 2 – <- Example of a PDP in the battery sector

2.2 Fashion and Textile Sector

The fashion industry is one of the most polluting, with high resource consumption and waste production. The DPP offers an effective solution to increase transparency throughout the textile value chain, providing detailed information on material origin, production processes, and the environmental impact associated with each garment. By providing this data to consumers, the DPP encourages more conscious and sustainable choices. Additionally, it facilitates recycling and reuse practices, which are central to transitioning the fashion sector to a more circular model.

Figure 3- PDP aplicado ao setor do vestuário

2.3. Electronics Industry

The electronics sector also faces critical challenges, such as the rapid obsolescence of products and the difficult recycling of devices, which often contain toxic components or valuable materials like precious metals. The DPP improves traceability of electronic components, helping to identify materials that can be safely and efficiently recovered. With increasing legislation on electronic product recycling, the DPP helps companies comply with regulatory requirements and reduce the environmental impact of their products.

3. Benefits of the DPP for Businesses and Customers

The implementation of the DPP offers a range of benefits for both businesses and consumers, as well as society at large. For businesses, the DPP improves supply chain management and provides a market differentiation opportunity by demonstrating a commitment to sustainability. The DPP also facilitates product innovation, promotes design for reuse and recycling, and can help reduce dependency on virgin raw materials.

For consumers, the DPP offers an unprecedented level of transparency. End-users have access to clear and detailed information about the origin and impact of the products they consume, enabling them to make more informed and sustainable choices.

Figure 4: Pdp benefits

Moreover, the DPP can help enhance consumer trust in businesses by ensuring they are adopting responsible practices and complying with environmental regulations. However, despite its numerous benefits, the DPP implementation faces a series of complex challenges that need to be overcome to reach its full potential.

4. Key Challenges of the DPP

While the DPP offers numerous benefits for sustainability and the circular economy, its implementation presents several challenges. These range from increased production costs to market and consumer adaptation. Below are some of the main barriers to the widespread adoption of the DPP.


4.1 Product Cost

Introducing the DPP in various industries will bring significant financial challenges, primarily due to the technology investment that companies will need to make. These additional costs arise in several areas, including:

  • Software: Companies will need to choose between developing their own DPP system or acquiring an existing solution, which may include licensing, updates, and software maintenance costs.
  • Hardware: Implementing sensors and monitoring devices to collect real-time data (such as energy consumption, water use, and CO2 emissions) represents a significant cost. Digitalization also requires a robust technological infrastructure, often lacking in smaller companies.
  • Human Resources:: To ensure efficient DPP usage, companies will need to invest in specialized training for their employees, as well as hire new qualified technicians to manage and monitor the system.

These investments will have a direct impact on production costs, which will inevitably be reflected in the final product price. Given the current global inflationary pressures, a widespread price increase could exacerbate economic accessibility for consumers, particularly in sectors where goods are essential.

Additional considerations:

  • Impact on Small and Medium Enterprises (SMEs):While large companies may have the resources to absorb these costs, SMEs may face greater difficulties. Many of these companies lack the infrastructure or capital necessary to support significant investments, which could result in market exclusion for some of them.
  • Need for Government Subsidies or Incentives:To mitigate initial costs and avoid excessive price increases, government incentives may be essential. This could include support for acquiring technology or tax deductions for companies meeting DPP requirements.
  • Risk of Price Inequality:An increase in product costs could exacerbate consumption inequalities, especially among consumers with limited purchasing power, making it more difficult to access essential products. Public policies supporting sustainable product consumption, such as direct subsidies, could help mitigate this impact.

 4.2 Loss of Competitiveness in Export Markets

Mandatory DPP implementation in Europe, without global adoption, could create export market inequalities. This situation creates a competitive disadvantage for European companies. Consider the following example:

  • Company X, based in Europe, and Company Y, based in the United States, produce the same product and aim to sell it to a customer in Asia.
  • Assuming that both companies face the same production costs, such as labor and energy, Company X must assume the additional costs of implementing the DPP, as required by European regulations.

In this context, Company X may be forced to raise its product price to cover DPP costs, while Company Y does not face the same regulatory requirement. Thus, Company Y can offer the same product at a more competitive price, gaining a significant advantage in the external market.

Additional considerations:

  • Long-term Implications:In the long term, this loss of competitiveness could affect exports, impacting on the sustainability of European companies and, by extension, the EU economy.
  • Regulatory Disparities:Companies outside the EU do not face the same DPP compliance costs, which could reduce European companies' competitiveness in global markets.
  • Potential for Trade Barriers:Although the DPP is essential for promoting sustainability, it could also create indirect trade barriers for European companies competing in global markets without equivalent regulations. trade barriers for European companies competing in global markets without equivalent regulations.

 4.3 Changes in Consumer Habits

DPP implementation aims to promote the circular economy, reduce environmental pollution, and encourage the consumption of more sustainable products. However, the success of this initiative depends not only on technology and regulation but also on changing population consumption habits.

One of the biggest challenges is ensuring that consumers consciously choose more sustainable products, even if they may be more expensive. Currently, with the threat of recession in Europe, rising inflation, and a loss of purchasing power, many consumers are likely to prioritize price over sustainability.

  • Price Disparity:Products with DPP and better environmental indicators may be more expensive due to technological investment. However, consumers, especially during economic crises, tend to choose cheaper products, regardless of environmental impact.

Additional considerations:

  • Awareness vs. Price: A sensibilização ambiental pode ser alta, mas o fator preço continua a ser determinante. Sem incentivos financeiros (como benefícios fiscais para produtos sustentáveis), é improvável que haja uma mudança significativa no comportamento de compra.
  • Impact of the Economic CrisisInflation, unemployment, and loss of purchasing power could hinder progress in adopting sustainable products, compromising the EU’s goals for a more circular economy.
  • Incentives for Sustainable Consumption: Public policies offering incentives for consumers to purchase sustainable products could be crucial in overcoming this obstacle, such as VAT reductions on environmentally certified products or direct subsidies.

5. Conclusion

The implementation of the Digital Product Passport brings clear benefits in terms of sustainability and the circular economy, but the challenges cannot be ignored. From increased production costs to loss of competitiveness in the global market and consumer resistance to paying more for sustainable products, finding a balance is essential. To mitigate the negative effects, the development of public policies that incentivize both companies and consumers to embrace this transformation in an accessible and fair manner will be crucial

Bibliographic References

European Data Portal (2024). EU’s digital product passport: Advancing transparency and sustainability. Retrieved October 14, 2024, from https://data.europa.eu/en/news-events/news/eus-digital-product-passport-advancing-transparency-and-sustainability

European Commission (2019). European Green Deal. Retrieved October 14, 2024, from https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_pt

European Commission (2020). Circular Economy Action Plan. Retrieved October 14, 2024, from https://environment.ec.europa.eu/strategy/circular-economy-action-plan_en

European Commission (2022). Ecodesign for Sustainable Products Regulation. Retrieved October 14, 2024, from https://commission.europa.eu/energy-climate-change-environment/standards-tools-and-labels/products-labelling-rules-and-requirements/ecodesign-sustainable-products-regulation_en

Qliktag. (2024). EU Digital Product Passport Powered by the Qliktag Platform. Retrieved October 16, 2024, from https://qliktag.com/eu-digital-product-passport

Circle Economy Foundation. (2023). Closed Loop Pilot – Pioneering circular business models in fashion. Retrieved October 16, 2024, from https://knowledge-hub.circle-economy.com/article/9470

Contentserv. (2023). Digital Product Passport: Ticket to achieving a circular economy. Retrieved October 16, 2024, from https://www.contentserv.com/blog/digital-product-passport-ticket-to-achieving-circular-economy

Pedro Moreira

Industry & Maintenance – Program Coordinator