Digital Product Passports and Consumers: The Ticket towards Circularity?
Over the last several years, European policymakers have established the goal of achieving the complete green transition of the European economy. One of the targets is to solely allow circular and sustainable products within the EU’s internal market by the year 2030– to this end, the EU’s Circular Economy Action Plan, produced in 2020, analyses products’ and materials’ life cycles in order to create a framework in which the final outcome results in no waste, all in support of the European Green Deal (Source: Renewable Matter). The general framework of the Circular Economy Action Plan can be seen below.
Figure 1: The EU Circular Economy Action Plan stages, Source: CEN.
The successful implementation of this sustainable product policy within Europe is particularly important since it will subsequently automatically pertain to all phases of global product value chains– the EU’s definite action is vital in establishing circular business models as the world’s leader. To the accomplishment of this target, measures such as customer legislation, product design and guarantee, and material recyclability are being employed at the micro-level through the Sustainable Products Initiative, which also stems from the European Green Deal. This initiative was introduced as a means to recommend additional legislative measures to make EU-market products more sustainable (Source: European Commission). On the spotlight, however, is one additional, newly-introduced measure to meet that same end goal: the official requirement of digital material and product passports for all relevant products.
Digital product passports (DPP) are intended to provide consumers with vital information on the products that they use– they collect data on products’ value chain by clearly defining the materials within these products and outlining aspects such as their origin, safety, repairability, and recyclability. On a long-term basis, the aim of DPPs is to boost sustainable production, facilitate the transition to a circular economy, and provide new business opportunities, as well as allow authorities to corroborate businesses’ compliance with legal requirements (Source: Renewable Matter). Essentially, it is meant to act as an inventory of all materials used, which will aid consumers in making sustainable decisions and provide them with all vital information on the right to repair: in 2021, the EU established a new initiative requiring companies to make their products reparable for ten years after coming into market (Source: E&T), further establishing a means to transition into a general sustainable behaviour.
However, while DPPs encompass a wide range of sectors, it is vital to inspect this system more specifically with regard to circular products.
Consumers’ attitude towards circular products
On an international scale, policy makers have already been introducing the need to shift towards a circular economy system, and this has been trickling into businesses’ strategic plans over time. However, in order to carry out this shift in a more sustainable fashion, there are numerous challenges that all parties involved in this change are confronted with. More specifically, this concerns those who would generally be the last link of supply chains in a linear economy: consumers.
Together towards circularity: A new norm?
As consumers’ role is traditionally limited to the purchasing of products, they are often uninformed about their own intermediary role between producers and the waste collection process. Though often unaware of their own importance in the circular product cycle, there is a vital relationship between emotional reaction and pro-environmental behaviour in individuals: the more present their emotional reaction is, the more likely they are to feel personally concerned and will employ circular behaviour.
A study aimed at identifying impediments faced by consumers in their deciding whether to partake in circular efforts found that they often tend to have a “very positive attitude towards repairing and durability”, and 85% of people worldwide report that they have altered their purchasing behaviour to be increasingly sustainable in the past few years (Source: Business Wire), as they additionally believe that their own actions could aid in reducing unsustainable waste and combat climate change (Source: Atlas Renewable Energy). Figure 2 illustrates respondents’ views on the importance of implementing sustainable measures. However, there is a significant disparity between the values reported and actual circular actions (Source: Trinomics).
This study, which was carried out by economic and policy consultancy LE Europe, used the variables of rate of recycling and waste production per capita in order to evaluate consumers’ behaviour, and utilised both surveys and behavioural experiments in various countries in order to capture the most representative results. The study found that consumers generally feel concern for the environment and are therefore motivated to partake in CE activities– particularly compelling is the finding that the groups investigated were additionally motivated to purchase more durable products in order to save money. To this end, nine out of ten participants reported that they preserve items that they have owned for a long time and the vast majority additionally confirmed that they recycle unwanted things and repair them in case of damage.
Figure 2: Percentage of respondents who said that it is “extremely” or “very important” that companies implement programs to improve the environment (Source: Atlas Renewable Energy).
A further study carried out by Borrello et al. found that the majority of individuals analysed reacted favourably to the use of technology meant to close loops, in this case specifically in the food sector (Borrello et al., 2017). Although some reluctance to changing their food habits was expected, particularly as risk tends to make people inclined to maintain the status quo, results showed that a significantly large portion of consumers would be willing to commit to participating in circular economy efforts. Studies of this kind can be used further in order to act as incentives and insight providers for stakeholders aiming to replicate loop-closing efforts.
However, the discrepancy between these reported beliefs and actual actions must be evaluated. A finding by the name of the theory of planned behaviour lays out the fact that individuals have a tendency to be rational and therefore make informed decisions and take into consideration the ramifications of their actions prior to choosing whether to engage in a behaviour. In contrast to this thinking approach, it has moreover been confirmed by an additional study executed by Sharma and Foropon that environmental attitudes do not actually directly influence purchase intentions. In an attempt to understand how consumers determine how “green” a product is, it was found that certain other attributes are also important to them: Consumers that are environmentally conscious are more inclined to purchase green products but tend to firstly consider other characteristics such as price, quality and brand.
Therefore, the gap between reported values and substantial action can be explained by the finding that more consumers would purchase circular products if prices were cheaper or comparably-priced to normal products (Sharma & Foropon, 2019). Alternatively, if consumers were exposed to more accessible information regarding their products, they would be more inclined to buy the circular version when available. Participants of the aforementioned study reported that they generally expect to receive information on products’ durability through product descriptions and guarantees, for instance. Others furthermore expressed that they expected such information via retailers, manuals, or the manufacturer’s website (Source: Trinomics).
Correspondingly, a useful tool in order to combat this misinformation that consumers are faced with are the aforementioned digital product passports.
Digital product passport use with circular products
In order to reach the European Green Deal’s demanding aims, it is necessary to recycle a far larger amount of waste, and a wider range of markets must be provided with recycled materials. When it comes to plastic, for instance, merely 5 out of 30 million tons of plastic products successfully get converted back into marketable products at the end of their lifecycle in Europe alone. Of the remaining waste, it generally sees an end of incineration, landfill, or exportation for recycling purposes (Source: Politico). To further illustrate the necessity of a tool to combat this issue, Figure 3 shows the rate of plastic packaging recycling in Europe. As previously mentioned, product passports have the aim of providing a convenient, transparent overview of products’ and materials’ characteristics, which would allow consumers insight into the quality and recyclability of circular products. This component has the potential to combat consumers’ worries regarding their choice between circular and regular products, and, once aware of the advantages and general information, may eventually be able to be incited to select green products over others.
Figure 3: Plastic waste and recycling in the EU: Recycling rate of plastic packaging waste (Source: European Parliament).
The entity which especially facilitates this is the platform Madaster, which is used by the European Commission as a means to enable material passports’ creation and registration, acting as a “material register”. This online platform acts as a backlog that provides detailed information on aspects such as the quantity, quality, size, and location of elements and products used by a specific building, which over time is meant to adapt and evolve. Its long-term goal is to eradicate waste by giving every material in a given environment a documented and recorded identity in order to heighten chances for products to be reused multiple times and recycled correctly once at the end of their lifecycle (Source: Renewable Matter, Totaro). Some products and sectors in which the DPP is planned to be implemented include for instance consumer electronics, fashion, furniture, as well as information and communication technology. Additionally, it is designed to provide information on so-called “high impact intermediate products”, which include steel, chemicals, and cement. To further illustrate the aims of a digital product passport in a more concise way, the sustainability platform UNISOT has created an exemplary overview for a beverage product, shown below. In this mockup, one can trace data such as the physical origins of the product, as well as the energy and water consumption and CO2 emissions expended for its production. It also directly states the ownership transfers on its course to the consumer.
Figure 4: Example product passport for a bottle of apple juice (Source: UNISOT).
However, with these sectors and playing fields established, it must be taken into account that each comes with its own set of both potential growth capacities and obstacles.
Potentials and Obstacles
According to the director of the aforementioned Madaster platform, the industry with the greatest potential in terms of the introduction of the digital product passport is the construction sector: the materials utilised, such as sand, concrete, and gravel, among others, comprise the largest material flows and therefore account for the largest carbon footprint in production. Therefore, the implementation of a more circular system is especially vital in this sector; through the conversion of waste demolition materials into full raw materials that can be re-utilised for new construction (Source: Anthesis). However, the recycling of building materials is presently only occurring on a rather confined scale and could greatly benefit from DPPs’ ability to outline details to these materials in order to allow the individuals concerned to make more sustainable decisions that incorporate more safe and easy-to-recycle materials. Additionally, digital product passports provide an overview that can allocate certain materials in this sector to projects that can make better, more economical use of them.
Despite this, the greatest positive impact potential lies in the chemical sector, a division in which 95% of manufactured goods are categorised: the recycling process for paper, battery, and plastic is all essentially chemical (Source: CEFIC). The chemical industry is responsible for a vast range of vital areas (Figure 5), such as the recycling of wind turbines approaching the end of their lifecycle and producing battery components to reduce CO2 emissions in the manufacturing of electric vehicles (Source: Politico).
Figure 5: Strategic value chains in the chemical sector (Source: CEFIC).
Nevertheless, there are equally potential obstacles to take into consideration. In the case of digital product passports, some existing impediments are for instance data security and privacy issues. In order for a product passport to be successfully and efficiently enforced for a product, it is vital to have a coordinated collaboration among all economic actors within the affected supply chain. The sought-after network outcomes can only come to fruition through a common, industry-wide solution. In order to achieve this, the first step would be to identify all actors involved, as well as the necessary data needed for a DPP (Source: Medium).
That being said, the ultimate hurdle to overcome is demanding both transparency and common standards from all key players in the given industry– be it regulators, suppliers, buyers, etc. (Source: Renewable Matter, Totaro). To overcome this, some technical implementations exist as of now: trust anchors that aim to help give companies a verifiable identity provide services, such as the Global Legal Entity Identifier Foundation, can allow companies to cooperate with one another “without having to build up a bilateral trust relationship” (Source: Medium). However, there is a long way to go in finding solutions to coordinate all participants if the aim of the product passport is to be effectively achieved.
DPPs: What to bear in mind
Aside from regulatory conditions, there are additionally general product passport requirements that need to be considered. As previously mentioned, all value chain actors and DPP users each have their own demands and necessities– taking these into consideration can grow digital passports’ approval. However, the implementation of the digital product passport’s concept can also be carried out through a decentralised technology– in simple terms, this means that every actor in the value chain creates their own identifiers and are not bound to one central precedent. This would have the benefit of actors being able to determine their own data’s storage location and access rules, as it makes the DPP technology-independent and eliminates one common system that manages product information centrally (Source: Medium).
Aside from the general format of data storage, however, the issue of access control must first and foremost be regarded: companies often protect and keep certain information, particularly about a successful product, secret. In order for the ability to differentiate competitors to persist, secrecy is a necessary aspect for the implementation of DPPs. Additionally, for the successful universal implementation of product passports, the system must be flexible enough to consistently continue to evolve along with actors, adding new product features, individuals, or companies as needed.
Equally important is inclusivity in order to ensure that small economic actors are not prevented from participating in this development, particularly in the sense that costs and other technical obstacles should not exclude these groups. In addition to this, every actor must be able to enact its own solution for the implementation of the DPP system in its own context. For this reason, a general reliance on one single technology provider should also be averted from the start. It is also vital that an effective technical strategy is employed in order to ensure that the information provided by digital product passports is not only accurate, but likewise verifiable. To this end, audits or a more cautious verification process by third parties can help create a more trustworthy and legitimate platform (Source: Medium).
Finally, some further essential elements to consider are product design and guarantee requirements– throughout a product’s entire life cycle, maintaining producer ownership is vital to assist in the creation of products that are both long-lasting and repairable. Therefore, the focus should shift from solely energy efficiency to product life cycles– to this end, there will soon be a sustainable products policy initiative in place as part of the EU Ecodesign directive that will help facilitate this point (Source: Renewable Matter).
Digital product passports and consumers: an ideal match towards circularity?
Aside from the aforementioned convenience of consumers having one accessible information source regarding products and materials, individuals have the long-term benefit of ease of education that will allow them to better understand what makes a product green and the advantages of choosing one over a non-circular product. Along with this, the DPP can act as a transparent tool that essentially informs the end customers about all elements of the product in a way that will allow them to make more informed purchasing decisions and minimise their own carbon footprint– they are hereby granted the ability to check how “green” the product is, whether it contains allergens, what its general CO2 footprint is, and can in the long-run be more aware of the repair services at their disposal (Source: Re-Tek).The figure below depicts the most effective areas of an already-existing product passport in the fashion industry, with the majority of respondents placing the “traceability of product materials and supply chain” as the most effective and helpful aspect of the DPP in this particular sector, which further highlights the importance of transparency and ease of access to vital information about a product or material.
Figure 6: Most impactful use case for product passports (Source: The Business of Fashion).
In turn, since the product passport additionally specifies certain aspects about consumer behaviour, it also offers the capacity for suppliers and manufacturers to optimise products correspondingly over time. It would all the more allow for anonymous direct contact with consumers (in a privacy-law-compliant manner) in order to develop more direct customer service and boost consumer trust. Along with this, even the product’s packaging can become part of the digital product passport concept: real-time updates can be issued once it becomes available in electronic form, which can ultimately become a beneficial cost-saving measure (Source: Medium).
Outside of the circular material sphere, however, there are a number of existing platforms that act as digital product passports. For instance, the app Yuka, created in 2017 by a team of French developers, provides an accessible means of analysing food items and products in a way that allows consumers to be more health-conscious and informed– it provides users with information on ingredients found in the product based on different risk categories after a product is scanned (Source: Yuka). Its 27 million existing users further suggest consumers’ high regard for transparency and accessibility to vital information that may be relevant to them, and demonstrates that when there is a direct benefit to the end user, they will be inclined to use the services at their disposal to reach a substantial end goal.
As measures continue to be taken to effectively and efficiently implement the digital product passport within the EU, all economic actors of the supply chain can be affected by the considerable potential for long-run benefits resulting from this development.
Specifically, the end consumer is met with significant benefits, including ease of accessibility and a level of transparency that has the potential to increase customer loyalty to certain products, materials, services, and brands. The several existing instances of the digital product passport and comparable platforms show that the development of such services may see continued success, hereby aiding in reaching the EU’s circular economy goals in the foreseeable future.
Although manufacturers and retailers face some challenges in the implementation of DPPs, the European Commission’s motives and goals as outlined in the European Green Deal are a great driving force towards taking the leap despite the potential hurdles that may arise over time. In the long-run the employment and standardisation of the digital product passport across sectors has the capacity to support a sustainable production increase, conceive new business opportunities, and ease the evolution towards a circular economy.
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