Digital Product Passports: Enabling a Circular Economy
By Dave Dickson of PicoNext
Over the past several years, markets and governments have focused on “circular economy” principles as a way to drive greater sustainability and reduce the effects of climate change. As defined in the European Union’s Circular Economy Action Plan, a circular economy is “where the value of products, materials and resources is maintained in the economy for as long as possible, and the generation of waste minimised.”
The imperative for circular economies is urgent: according to the World Bank, current demand for natural resources exceeds the planet’s ability to generate them by a factor of 1.75, prompting the need for solutions to mitigate impending negative repercussions. And these trends directly impact brands.
Circular vs Linear Economies
A circular economy is the opposite of a linear economy.
It’s less of a straight-line flow of goods through the economy – from raw material extraction, to manufacturing, to a retailer, and then finally delivery of goods to the consumer, who disposes of them at the end of the day – but rather an optimization of the sustainability, reuse, and repair of products to keep them useful.
The result is a prolongation of the utility of goods purchased by the end-user – diverting products away from the landfill and finding new lives for them as they are reused, upcycled, or remanufactured.
Product data: Key to sustainability transparency
One way for brands to speed the transition to circular economies is through data transparency. In 2022, the European Union implemented the concept of a Digital Product Passport, an emerging collection of technologies that surface sustainability data for a product and make it available to the consumer.
They then obtain insight into the sustainability attributes related to the product, and can compare purchasing options to find the best one for them.
Sustainability transparency and consumer preferences
We recently conducted an original research study about Digital Product Passports, surveying over 1000 consumers across Europe and the United States to determine how they view this increased data transparency. Overall, the sentiment was positive, with 74 percent saying that additional sustainability transparency is key for them to trust a brand. Moreover, 71 percent indicated that sustainability is an important attribute they consider when purchasing from a brand.
In terms of the attributes consumers would like to see in a Digital Product Passport, recyclability surfaced to the top, with 56 percent responding favorably. Following recyclability was insight into materials composition (44%); statements on the absence of child labor (40%); and waste reduction efforts, clean energy usage efforts, and the general working conditions of employees (all tied at 39%).
In addition, 61 percent of consumers said viewing a third-party audit or certification in a Digital Product Passport increases their trust in a brand and its products. And it’s also important for consumers that they are able to inspect the data in a Digital Product Passport publicly (80%) and that the environmental claims be tamper proof (also 80%).
Tracing products throughout their lifecycle
With particular relevance to circular economies is tracing the lifecycle of a product: from sourcing, through manufacturing, and on to disposal and recycling.
We found that over half of those surveyed – 58 percent – thought that it would be important to trace a product through its lifecycle using a Digital Product Passport. As such, companies must decide at which level they would implement Digital Product Passports for their product lines – at the model, manufacturing batch, or individual item level. As the unit of measure decreases, the complexity of data management increases.
Digital Product Passports: Benefits to stakeholders
As consumers and other stakeholders are introduced to Digital Product Passports, they can benefit from this transparency in a variety of ways.
Consumers, for example, can compare sustainability attributes when making purchase decisions, in addition to accessing post-sale product services, downloading care and usage guides, finding repair information, and confirming product authenticity.
Brands can better substantiate their sustainability claims, have insight into post-sale data, and communicate product recall information. And retailers can ensure that the products they are distributing are authentic and genuine.
Driving towards a circular economy
As governments and market participants place an increasing emphasis on circular economics, Digital Product Passports can increase the transparency by which consumers make sustainable purchasing decisions.
Gathering and implementing the data necessary will take work by brands and their supply chains, but the result is a value chain that is less wasteful, longer lasting, and more eco-friendly.
About the Author
Dave Dickson is the founder of PicoNext, a blockchain-based sustainability and customer engagement platform for brands.