The designation “passport” indicates a regulatory component, especially around the movement of goods. That is deliberate and explains the purpose of the digital product passport. Urgency for a digital product passport tool culminated along with schemes that have a broad goal of vastly improving the efficiency of production and supply chains. In the face of a global business environment that is frequently, inadvertently or not, incentivizing wastefulness, the digital product passport (DPP) aims to make a big dent in the business of inefficiency. This is why a DPP for every industry, and eventually every product, is part of the European Circular Economy Action Plan. Businesses that depend on selling physical items will need to endure a period of adjustment. The regulations themselves are being enforced in a phased schedule, sensitive to a transitional phase. Many businesses will want assistance with compliance. At the very least all businesses selling in the European market need to be familiar with what the new laws mean for their business, especially as new requirements come online.
What is the European Circular Economy Action Plan?
The Circular Economy Action Plan/CEAP is part of the ambitious new European Green Deal. The European Green Deal is the E.U.’s answer to the United States’ Inflation Reduction Act, another massive plan for stewarding more environmentally sustainable activity. This world changing project has 3 broad goals:
- No net emissions of greenhouse gasses by 2050
- Economic growth decoupled from resource use
- No person and no place left behind
Although these goals seem broad, and some have called them too ambitious, there is a substantial budget that’s already been dedicated to the New Deal. Funding comes from about 600 billion Euros of investment from the NextGenerationEU recovery plan, a post-pandemic investment effort, and includes investment from the EU’s sizable 7 year budget.
What is carbon leakage?
The European Union has introduced all new frameworks to make sure that the Circular Economy Action Plan is successful. The transitional phase of the E.U.’s plan to reduce and eliminate carbon leakage, the Carbon Border Adjustment Mechanism (CBAM), began in October of 2023. CBAM success will be measured by the price of carbon between domestic products and the price of imports being equalized. Equalization of carbon prices means that production and industry will be difficult to move outside of Europe toward other geographical and regulatory environments for the purpose of rent-seeking. Where this happens today, it is overwhelmingly to take advantage of carbon production and byproducts being cheaper outside of Europe. The term “carbon leakage” describes situations where this occurs. Managing and enforcing the reduction in carbon leakage will require tools, such as QR code labeling, that can associate unit level products with origin information.
For the transitional phase that began in October, 2023, the industries that rely on cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen are obligated to report volumes of their imports and associated greenhouse gas emissions. No costs are imposed on businesses at this first stage of the CBAM. For the relevant industries, the first reporting will be due for submission on January 31, 2024 and must include data from the 4th quarter of 2023. The expectation is that additional industries will be added to the reporting scheme based on how reporting for this first cohort of industries goes. The CBAM will likely be implemented very quickly though. The Green New Deal target for net greenhouse gas emissions by 2030 is a reduction to 55% compared to 1990 levels. Perhaps the most important concept being applied for achieving this reduction is the Digital Passport, a key part of the Circular Economy Action Plan (CEAP).
Digital product passport regulation as part of the Circular Economy Action Plan
The Circular Economy Action Plan has the following goals:
Make sustainable products the norm in the E.U.
- Empower consumers and public buyers
- Focus on the sectors that use most resources and where the potential for circularity is high such as: electronics and ICT, batteries and vehicles, packaging, plastics, textiles, construction and buildings, food, water and nutrients
- Ensure less waste
- Make circularity work for people, regions and cities
- Lead global efforts on circular economy
To confirm progress toward these goals, the European Union will use the Digital Product Passport. The Digital Product Passport is a way to associate broader product information and make it relevant and accessible at the unit level. The first industry to require a Digital Product Passport are batteries. According to Regulation (EU) 2023/1542 of the European Parliament and of the Council (esp. Item 44 of the introduction), the Digital Product Passport is meant to satisfy the following requirements:
- The product should be labeled to provide reliable and clear information including waste related details.
- Details about discarding the product, including waste operators that can appropriately treat waste batteries should be provided.
- The product should be labeled with its main characteristics, including the presence of hazardous substances.
- The advised information should be made available by means of QR codes that can be printed or engraved on the product or to the packaging and accompanying documents, with respect to ISO/IEC guidelines for standard 18004:2015.
While the exact requirements haven’t been set for all industries, it’s safe to say that the information provision requirements for batteries are indicative of what will be required for other products. Even with variations in the requirement, it’s clear that QR codes have been identified by the European Commission as the tool of choice for delivering the required information to product end users.
Ecodesign for sustainable products
The ecodesign for sustainable products framework sets design requirements to significantly improve their circularity, energy performance and sustainability aspects. It is designed to set performance and information requirements for all categories of physical goods sold in the EU market. Exceptions, such as food and feed, are defined in Regulation (EC) No. 178/2002. The framework also sets requirements for:
- Durability, reusability, upgradability and reparability
- Presence of substances that inhibit circularity
- Energy and resource efficiency
- Recycled content
- Remanufacturing and recycling
- Carbon and environmental footprints
- Information requirements, including the so-called Digital Product Passport
As with other parts of the E.U. Green New Deal, the “Digital Product Passport” is meant to provide and be a tool for monitoring the provision of critical, mandatory information about products sold in the E.U. The process of accessing the Digital Product Passport information is explicitly expressed described as “scanning a data carrier” that includes “attributes such as the durability and reparability, the recycled content or the availability of spare parts of a product.” The data carrier of choice for compliance is a QR code. Such data carriers are already being used in the compliance of E.U. requirements for wine labels, where nutrition and ingredient information is mandatory for wines produced after December 8, 2023.
Schedule for new CEAP regulations applicable by industry
The battery industry is the first to require the provision of new, product related information to consumers. Regulation (EU) 2023/1542 is effective beginning February 18, 2024 and includes the requirement for a carbon footprint declaration from:
February 18, 2025 for electric vehicle batteries
February 18, 2026 for rechargeable industrial batteries (except those with exclusively external storage)
August 18, 2028 for LMT batteries
August 18, 2030 for rechargeable industrial batteries with external storage
Because the battery industry is the first major industry to have new information requirements, it is interesting for all industries to get an idea of the kind of requirements coming down the line for them.
The carbon footprint declaration for electric vehicle batteries, rechargeable industrial batteries with a capacity greater than 2 kWh, and LMT batteries will require the following information:
- administrative information about the manufacturer;
- information about the battery model;
- information about the geographic location of the battery manufacturing plant;
- the carbon footprint of the battery, calculated as kg of carbon dioxide equivalent per one kWh of the total energy provided by the battery over its expected service life;
- the carbon footprint of the battery differentiated according to life cycle stage as described in point 4 of Annex II;
- the identification number of the EU declaration of conformity of the battery;
- a web link giving access to a public version of the study supporting the carbon footprint values referred to in points (D) and (E).
The Waste Framework Directive and textiles
Another very important framework for several industries is the Waste Framework Directive. The Waste Framework Directive lays down some basic waste management principles. It requires that waste be managed:
- without endangering human health and harming the environment
- without risk to water, air, soil, plants or animals
- without causing a nuisance through noise or odours
- and without adversely affecting the countryside or places of special interest
The 2023 Amendment to the Waste Framework Directive proposed a focus on textiles waste.