Introduction

Collaborative innovation is essential to establishing digital product passports (DPPs) within value chains. Implementing DPPs will require a large network of companies involved in the creation, use, and recovery of a product, to work together closely in order to track and share information about the product’s lifecycle. Moreover, they must also ensure that the data collected aligns with the definitions and priorities of both existing and upcoming regulations, as well as other voluntary initiatives in their relevant sectors. 

However, many gaps remain regarding the practical implementation of DPPs. Key challenges include data asymmetry¹, a lack of standardised and common frameworks and the need for collaborative business models², as well as incentive structures³ that motivate data sharing. This article discusses the importance of collaboration and innovation to address these challenges for the successful implementation of DPPs, which can facilitate business decisions to support circular and sustainable product design, supply chain operations, and product lifetime extension and recovery.

Aligned priorities, goals, and objectives in businesses

One of the main challenges to the adoption of digital product passports is the fact that the current objectives of businesses contradict circularity targets. The principles of circularity, such as waste reduction and resource efficiency, often conflict with traditional business goals of short-term financial gains and growth. Furthermore, knowledge about the necessary data, calculation methods, and reporting procedures to properly evaluate sustainability and circularity is still in its early stages. These methods are not standardised across different industrial supply chains, even though the materials used within them can be identical.

To overcome this challenge, businesses have to set sustainability and circularity goals at the business level and make them a core part of their operations – then measure their progress. This means embracing circularity in processes across the entire business, from product design and manufacturing to distribution, end-of-use, and recovery. Therefore having a shared vision for all the stakeholders, from top-level executives to front-line workers, is essential for motivating everyone to work towards the same goals.

Sustainable businesses that want to find the balance between achieving circularity targets and profitability must take both financial and environmental considerations into account when setting top-level priorities. The Corporate Sustainability Reporting Directive (CSRD) establishes a unified reporting framework that promotes transparency and comparability, improving the content and quality of sustainability information disclosed by companies. This can bolster trust among various stakeholders, and can ultimately drive sustainable growth and long-term value creation.

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Scalable and interoperable systems to overcome information asymmetry

Another challenge for the adoption of DPPs is the knowledge gap between value chain stakeholders. Key information about the materials and products produced is siloed within the different stages of production in various systems and databases. There is a lack of understanding of what data is required in DPPs, how to measure and account for this data, and what reporting processes and technology infrastructure are necessary to access this data and gain visibility into the supply chain to assess supply chain sustainability and circularity. 

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Regulations, standards, and initiatives driving DPPs

Regulations like the Corporate Sustainability Reporting Directive (CSRD),  German Supply Chain Act (LkSG), and other anti-greenwashing regulations increase the urgency to address this issue. These regulations are driving businesses to establish sustainability and circularity goals, measure their progress, and provide evidence for their sustainability claims. Starting with the EU Battery Passport regulation, the upcoming digital product passport regulations in the EU are specifying the specific data points and information that needs to be gathered by businesses across the supply chain to prove that products are truly sustainable and responsible. Auditors will also play a vital role in ensuring standards, verifying accuracy, and compliance with how regulations are met. 

The EU and the International Organisation for Standardisation (ISO) are developing standards for circular economy taxonomy. Their respective work on the Circular Economy Action Plan⁴ and the ISO/TC 323 Circular Economy⁵ will serve as a base for common language and understanding. These contributions towards a more consistent, coherent, and widespread framework for the implementation of circular economies ensure that the principles of the circular economy are integrated into international standards, making it easier for worldwide adoption. 

For easy implementation, it is essential to define data requirements and develop standards based on existing EU regulations. Building on existing data and ensuring interconnectivity would avoid redundancies that could make digital product passports a bureaucratic burden for companies. However, solving this complex challenge requires a shared vision and collaboration among many different types of stakeholders to establish scalable and interoperable systems and access data currently kept in silos, and all stakeholders must understand and agree on the definitions and standards that will be used in the DPP system. 

Other examples of collaborative initiatives focused on developing standardised data infrastructures for digital product passports are International Data Spaces Association (IDSA)⁶, Gaia-X⁷, Catena-X⁸, and the Global Battery Alliance⁹. Research programs like The Ecosystem Digital Product Passport (CIRPASS)¹⁰, which is funded by the European Commission, are also laying the groundwork for the widespread deployment of digital product passports. 

Such initiatives are crucial to establishing common protocols for the seamless sharing of data across different platforms and systems. With DPPs, companies will be able to access data quickly and efficiently, allowing them to make informed decisions to transition their operations towards sustainability and circularity.

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Ecosystem approach to align business models and incentives

Collaboration between different businesses is vital to aligning their mutual priorities and goals with what information to track and share about the product's lifecycle using DPPs. As some of the information could be highly sensitive and confidential, businesses need to find the balance between sharing information and privacy. They must have an understanding of what data they can share, with whom they can share that data, as well as what the strategic and business value of doing so is. Encouraging more open data sharing requires businesses to take an ecosystem approach to understand how digital product passports can create new markets and opportunities, while advancing a more sustainable and circular economy.

A circular economy is an ecosystem approach by its very nature, and therefore developing digital product passports must also follow the same structure. In order to establish successful digital product passport-enabled value chains, businesses need to collaborate closely to:

1. Develop a shared vision based on a mutual understanding of desired outcomes and business value. 
2. Understand the resources, technologies, and stakeholders within the ecosystem and how to utilise them for better decision-making. 
3. Engage in open innovation and co-creation to identify solutions that reduce waste and increase resource efficiency to create more sustainable and efficient supply chains. 
4. Monitor and evaluate their efforts to ensure that it is delivering the desired outcomes.

These collaborations can occur through small, incremental pilots or experiments to test and trial new ideas and concepts. Businesses stand to gain valuable experience by challenging existing assumptions and beliefs and learning from their failures. Such efforts can help businesses uncover the value of greater information sharing and collaboration across the value chain.

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Conclusion

Collaboration is essential for the development of circular innovation, and DPP value chains provide the digital infrastructure and processes required for companies to collaborate. DPPs are also necessary to overcome data asymmetry, define common frameworks for data collection, and identify joint business models through greater data sharing. By engaging in pilots and innovative projects, new markets and opportunities that are sustainable yet profitable can be created, while driving innovation and change in industries. 

At Circularise, we help companies take the first steps towards digital traceability. By bringing together various actors across their supply chains, we encourage them to work together to identify the kinds of information available to them and the information they need from other actors to make better decisions. Through this collaboration, the companies we work with better understand how digital product passports enable future business strategies that deliver greater value to their businesses and their supply chain.

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