In late March, the European Commission (EC) introduced the Digital Product Passport, a compulsory disclosure requirement mandating that, as part of the EU green deal, companies report the recyclability potential of every product they bring to the European market. Launched to advance reuse, recyclability, and waste goals to build a decentralized circular European economy, the EC’s framework includes a compliance deadline of 2026 for batteries, and timing for prominent high-waste sectors like consumer electronics, fashion, furniture, and “high impact intermediate products” including chemicals, cement, and steel is expected to come soon.
The newly established precedent for corporate traceability requirements has American enterprises questioning whether and when they’ll be subject to similar regulations. Considering how a United States equivalent to the Digital Product Passport could satisfy substantial consumer demand for supply chain transparency and circular products and propel struggling corporations into a digital-first future, it seems there’s no time like the present.
The Role of a Digital Product Passport
The EC’s Digital Product Passport was designed to inventory data on all materials involved in the creation of a product or building, complete with data about where these inputs originated, to discourage single-use products and ensure proper recycling and waste protocols. The mandate also grants regulators unprecedented visibility into the supply chain of materials and final products, information that may be critical to achieving reuse and waste management objectives.
Businesses benefit from this system on many fronts. These product passports can facilitate the transition to a circular economy, bolstering material and energy efficiency and prolonging product lifetimes. In an era when climate risk influences business decisions more than ever before, such economic infrastructure would drive sustainability and responsible corporate operations that could reduce product disposal costs.
But this program – and the supply chain sustainability that it aims to promote – also has strong value to consumers conscious of environmental and social risk – and thus consumers’ brand loyalty. The passport acts as a record of steps and compliance standards that can help managers identify and prevent the use of exploitative or illegal labor practices, the creation and sale of counterfeit products, product diversion, and other violations of environmental, social, and governance (ESG) commitments.
Finally, a mandate for closer tracking helps to enhance product safety and increase consumer trust. Recent years have given rise to stakeholder capitalism, a new model for financial systems that hold corporations accountable to society at large. A clear view of a product’s origins enables consumers to make informed purchase decisions and fully grasp their role in the global supply chain.
Once fully implemented, the Digital Product Passport will help businesses in the EU contribute to and reap the benefits of a circular economy, optimize product usage by extending product life cycles, engage in sustainable supply chain management, and nurture customer trust. The Digital Product Passport might hold even more promise for the US.
Give Them What They Want
A study by Simon-Kucher and Partners found that US consumers are the most willing (42%) compared to other populations to pay for sustainable products and services, and rank above the global average in considering sustainability an important consideration when making a purchase. And they’ve indicated that reuse is a priority, too. The value of the American secondhand and resale apparel market is growing rapidly and is expected to reach $77 billion in 2025.
Regular, high-impact food recalls making the food and beverage sector a regular target of criticism and consumer demands for change around traceability. Existing customer experience-oriented traceability initiatives in the food and beverage industry have been well-received in EU markets and bode well for application in American markets. For example, Kezzler partnered with Dutch dairy brand Royal FrieslandCampina to develop an app called TrackEasy to help parents track their popular FRISO infant formula on its journey from the farm to their fingertips. A QR code on the packaging uses the GS1 Digital Link standard, which allows customers to learn more about the provenance of the FRISO product and all inputs and confirm authenticity. The success of that campaign reflects consumers’ desire for visibility into the safety of the food and beverages they serve to their families.
These product data profiles also empower consumers to connect to their food as broader digitization pushes them physically further away. In 2021, more than half of Americans shopped for groceries online, and online grocery sales are set to see double-digit growth over the next few years. Online grocery shoppers cannot hold, sniff, or sample produce, but provenance can provide them with the data they need to make purchase decisions that reflect their health needs.
The American food and beverage industry is an obvious area of application for a U.S. equivalent of the Digital Product Passport, but the program has the potential to enhance consumer trust and sustainability goals far beyond that sector. Section 204 of the Food Safety and Modernization Act, which seeks to address the same core problem of insufficient product traceability but for public health purposes, indicates that broadening the traceability requirements to other industries could be feasible and – if guided by a data-driven implementation plan – embraced by the private sector.
But in addition to helping corporations meet escalating consumer demand for sustainability and transparency, a US Digital Product Passport can help them manage or alleviate myriad supply chain management challenges. Perhaps most immediately, it would grant companies the insight into their value chains that they need to navigate volatile regulatory environments and global disruption. A framework that enables American enterprises to track products if they are diverted or stalled – and identify recurring problematic links in their value chain – would facilitate more efficient production and cost savings overall.
A US Digital Product Passport would also serve as a catalyst for the digital transformation of American enterprises that have not yet made the jump to data-driven supply chain management. The aforementioned global shipping tariffs have converged with a litany of geopolitical tensions and rising inflation rates to spark a reshoring movement. Digital transformation can help position American enterprises for success in increasingly technologically advanced global markets.
Finally, adherence to ESG best practices is quickly becoming a key element of corporate value creation and consumer loyalty. The introduction of a US Digital Product Passport can help companies act on, monitor, and report progress on their ESG commitments, from information about raw materials and their source to the environmental impact of supply chain activity to choices about recycled materials. Prominent examples include the American semiconductor industry, which has faced criticism for unknowingly sourcing from Chinese entities who have committed documented human rights violations, a situation it may have avoided with a US Digital Product Passport in place for monitoring more closely material inputs and better managing reputational risks. Moving forward, these product data profiles may facilitate compliance with the Biden Administration’s legislation on forced labor, leading to increased transparency overall.
Preparing for Progress
Are digital product passports the answer to progress? The financial, operational, and reputational benefits of the EU’s Digital Product Passport program are clear, even in the early stages of its implementation. American policymakers would be wise to consider drafting an equivalent mandate. American businesses should embrace that transition when it arrives. Mirroring the European Union’s circular economy action plan, product life cycles can be extended and resources used more wisely. Consumer demand meets corporate need, and there’s a compelling case for the American private sector to provide digital product information — even without an official mandate.
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Chief Product Officer