Due to the circular transition of the economy and its fight against the depletion of natural resources, the European Union has signed environmental protection-related economic agreements and contracts.
The Green Deal is one of the most well-known and widespread agreements, providing theoretical support for a more sustainable and “green” European economy and concrete, actionable sustainability solutions. A digital product passport is one of the most pioneering and innovative solutions of the Circular Economy Action Plan (one of the main building blocks of the European Green Deal).
This shift to sustainability should not come as a surprise. European Union’s focus in 2018 was on developing a traceability system for products to promote and streamline sustainable production, reuse, and material recycling, as the circular economy proposes.
Digital product passports and other provisions of the Green Deal will likely become a reality shortly. How they will function and what data will be included are currently under consideration. Affected parties can have some critical inputs given that digital product passports could provide substantial business benefits. Therefore there are numerous reasons for businesses to get involved early.
What is a digital product passport?
Digital product passports will collect information about a product and its supply chain, making it accessible to all interested parties. This includes customers,, so they can better know the products they buy and their environmental implications. This enhanced data accessibility and suitability will facilitate the shift to a circular economy.
This initiative idea aims to lay the groundwork for gradually introducing a digital product passport in at least three major markets. It is anticipated to begin in 2024. These significant markets are materials, buildings, and vehicle batteries, which are about to expand in different sectors like electronics, packaging, and food.
E-waste is the fastest-growing waste stream worldwide, with an annual growth rate of over 4%, due to the short lifespan of electronic and electrical products. That being the case, to reduce future environmental impact, it is essential to focus on producing electronic and electrical products, which are also highly resource-intensive.
On March 30, 2022, the European Commission proposed a package of legislative measures as part of the European Green Deal and the Circular Economy Action Plan. The legislative package’s overarching goal is to improve the environmental friendliness, recyclability, and overall energy efficiency of all EU-manufactured physical goods. Electronic and electrical products are included, as already mentioned.
What exactly is a circular economy?
The circular economy is a production and consumption model that emphasizes the ideas of sharing, leasing, reusing, repairing, refurbishing and recycling of existing products and materials. In this way, the product life cycle is extended, and every item is reused in various ways.
Waste reduction is the primary objective of the circular economy. When the functional life of a product ends, as many components as possible are reused, adding to their value.
The take-make-consume-throw-away sequence used in the conventional, linear economic model has changed in this circular model. Moreover, this model extensively uses readily available, low-cost materials and energy.
Why should the European Union adopt the circular economy?
As the global population increases, the need for raw materials also grows. However, the availability of essential raw materials is limited. Due to limited supplies, some EU countries depend on other nations for their raw materials.
Additionally, the extraction and utilization of raw materials substantially impact the environment. Ιt increases energy consumption and CO2 emissions. However, CO2 emissions can be reduced by utilizing natural materials more efficiently or by sharing, leasing, reusing, repairing, refurbishing, and recycling existing ones.
To which configurations does the digital product passport connect?
The digital product passport is connected to regulations and provisions that enhance its value. For example, its chain of custody and data-sharing requirements are also in several other laws.
The most essential law and regulation that the digital product passport connects is:
- New EU Battery Regulation (Effective January 1, 2026): Repurposing electric batteries so that they can have a second life as stationary energy storage systems or as energy resources integrated into electricity grids. During their evolution towards digitalization and sustainability, manufacturers can develop innovative products.
What do those passports include?
The EU’s digital product passports take inspiration from the Battery Regulation, which mandates that all rechargeable industrial and electric vehicle batteries with a capacity greater than 2 kWh have their battery passports.
Each battery passport will include a unique identification number and a QR code containing information about the battery’s performance and durability. In addition, the passport will ensure that batteries can be recycled, that the product can be traced throughout the supply chain until its end, and that ownership and responsibility are clearly defined.
Digital product passports may initially concern primarily batteries and be linked to battery-related regulations, but over time, they will also include other products. Businesses in the textile, building materials, electronic waste, plastics, chemicals, and transportation sectors are all feeling the heat from government initiatives and consumer demands for more eco-friendly procedures.
Legislation is planned to connect these different product categories as part of the growing push for digitalization, related data sets, and environmental impact evaluation across product life cycles.
The product’s unique materials, processes, and data security needs will have their measures during the specific digital product passports. However, digital product passport systems develop with different requirements for various industries. In that case, this could pose a significant challenge for raw material suppliers who serve multiple industries.
Bureaucracy and digital product passport
Numerous businesses and politicians have already voiced opposition to digital product passports, believing they will harm small and medium-sized enterprises. The reason behind this is the fear of the bureaucratic process. Therefore, the European Union’s objective is to simplify the process as much as possible by presenting methods for relieving entrepreneurs of the considerations above and difficulties.
The greatest obstacle businesses and the government must overcome is the creation of a machine-readable, structured, and searchable open, standard, interoperable format for digital product passport data.
The rapidly evolving world of blockchain-based, decentralized approaches can meet these essentials and deliver critical product information to those who value it the most. Thus, this difficulty is insufficient to diminish the significance of the project mentioned above. Furthermore, new developments in blockchain technology will enable the secure transfer of vast amounts of data using a fraction of the energy.
This debunks an older argument regarding existing blockchains’ high operating costs and energy consumption.
Moreover, it is well known that the European Union pays special attention and attaches the necessary importance to personal data and its protection. Consequently, trade secrets must be safeguarded in digital product passports.
This requires a decentralized or distributed approach to the data. Diverse data storage and encryption forms will be needed to address these issues across industries. A decentralized system will deliver the most valuable standards of data interoperability.
Decentralization also implies that the product owner is the digital record owner, as opposed to the digital record being under the control of a centralized system where it could be altered. It also complements the EU Data Strategy, encouraging publicly held, high-value data sources to generate value for businesses, governments, and consumers.
Why does the Union choose the blockchain?
The development of the Digital Product Passport is facilitated by the fact that blockchain systems offer several precious benefits.
- They provide industry-leading Data Security for both businesses and consumers.
- Consensus-based data validation ensures that data is accurate and has not been altered or tampered with by malicious parties.
- All blockchain transactions are verifiable, traceable, and searchable on the blockchain, providing total transparency for all ecosystem participants.
- Blockchains are decentralized, resistant to censorship, and more secure than legacy technologies reliant on centralized servers.
But what happens to the products after the digital product passport expires?
After the digital product passport expiration, it is natural that the products will need to be removed from businesses or households. By the principles of the circular economy, these products should not be carelessly or irresponsibly discarded but instead collected and recycled with the intention of future reuse. So how will a business execute the above action? How will it ensure that its products are recycled in a way that saves the environment?
The European Commission’s Circular Economy Action plan, set to go into effect in 2020, has set forth the goal of taking into account the full scope of a product’s life cycle, from raw material sourcing and manufacturing to the final disposal.
A significant obstacle to circular economy strategies could be the need for more information regarding the characteristics of a product (such as its composition, production methods, and life cycle). Thus, these passports will reveal all pertinent information about the products, allowing businesses and consumers to know the exact details of their production and disposal in an environmentally responsible manner.
Therefore, businesses must strictly adhere to these passports and rely on renowned and certified professionals to remove the abovementioned products. But how can a company locate the most qualified and trustworthy professionals to dispose of the products with care, protecting the environment and expanding the circular economy’s values?
Through the Xworks network, which connects businesses and waste traders, products with expired passports can be removed immediately, efficiently, and with care.
By improving the conditions of product removal and recycling, Xworks represents a vital value chain for the European economy and, ultimately, the continuation of the circular economy.
This is made possible as Xworks connects trading professionals with companies, after verifying them to be trustworthy. Both parties are able to search in-depth through an integrated and dependable platform where they can find quality leads and discover valuable new markets. In addition, both parties have a single communication channel, preventing them from becoming confused by different messages on alternative channels.
How can a company use Xworks?
On the whole, access to Xworks is simple and uniform for all businesses (or waste traders). The only requirement for both parties is to fill out a standard form leading them to the excellent, engaging, and easy-to-navigate world of Xworks. Xworks fully complies with all rules and jurisdictions worldwide and at the European level. It also verifies all the companies that sign up through it.
Batteries are the test case, but as more supply chain traceability legislation comes into effect, incorporating more product categories, these requirements will expand, and Xworks will provide professionals qualified to remove all of the above products and materials. So shortly, Xworks is a penultimate step of the circular economy (since the final step is the removal and recycling of products ) and a crucial step in protecting the environment.
Providing credible sustainability claims and transitioning to circular-oriented innovation strategies through digital product passports, allows businesses to generate new value and capture a larger market share, thereby establishing trusting relationships with their audience. These facts will position companies favorably when digital product passports become a legal requirement in the coming years.
Find out more about Xworks and sign up to achieve all the above benefits. Find Xworks on Linkedin.
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