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We have highlighted already that it will take significant effort to implement Digital Product Passports (DPP), but we have focused on specific areas. Therefore, we'd like to provide a more comprehensive view of challenges you might face. Not in chronological order, nor in order of importance, as that is sure to vary depending on size and type of your business.
Many of these topics, we've touched upon already. Why nog browse through our blog posts to read in more detail.
1. Understanding the topic, and Organisational Change
DPP will impact most aspects of operations, not limited to legal, IT, marketing and sales as GDPR, for example. The majority of employees will be impacted in some way and therefore need to gain some level of understanding of DPP and how it will affect them.
DPP is likely to require significant changes in business processes and even in organisational culture. As in all organisational change, it will take effort, communications and training, and probably handling of resistance.
2. Data Collection and Management
Probably the most obvious challenge is managing to find, extract and verify the data required to comply with DPP regulations. Much is likely to be types of data you've never worked with before, some will be complex to find and to calculate.
Maybe the most challenging part of data collection will be obtaining the information from suppliers all the way upstream to extraction or growing of raw materials. Domestic, international, at varying levels of technological maturity and willingness. It's likely to turn out very complex. You might even need to exchange uncooperative suppliers.
But you need to look downstream as well, as DPP data are supposed to apply to the entire life cycle, all the way to recycling or disposal. To comply, you will need data on how your products perform and can be handled until their "end of time".
Classification is another aspect to keep in mind. Who should be able to obtain which aspects of your data? Some might be for public use, other for business partners and yet other for authorities (and maybe some other categories). Each data point will need to be classified and tagged.
Finally, all this data will need managing, verifying and maintaining up-to-date. It's not a drive-by operation but will affect operations continuously.
3. Technical Infrastructure
You will need a technical infrastructure to handle collection, storage, management and distribution of your DPP data transparently and in a way that easily integrates with your supply chain and with how consumers, customers and others access the data and compare it with the market.
It's likely that you have some data already, but locked in proprietary systems, either your own or those of suppliers of ERP, PIM or similar services. Are you able to extract the data from those systems?
4. Standardisation and Compliance
It's not sufficient to obtain and verify the data as mentioned in #1, it also has to comply with DPP standards. After all, DPP is intended to provide consumers with information to compare sustainability and environmental impact of products. That will not work if one product provides data per kilo, another per ounce and the third per litre. All data has to be by the agreed standard units AND, for the technical infrastructure to work, in the same data formats.
These standards will, quite naturally, differ between industries and for different types of products.
AND, they will evolve over time, as we can expect the entire DPP regulation to do.
5. Data Privacy and Security
In addition to data classification mentioned in #1, the DPP system will contain sensitive business information but needs to be transparent – at the same time. A delicate balance.
You might also run into issues with varying regulations regarding data security and data protection.
6. Cost and Resource Allocation
Reaching and maintaining DPP compliance will not come for free, as is apparent from the previous points. A substantial initial cost plus the added cost for maintaining the data.
Especially small companies are likely to find costs and needs for resources and competence challenging. We do, however, expect that there will be special consideration for smaller businesses, as in the Deforestation Directive.
However, as we have pointed out in other blog posts, the silver lining is that the effort and cost to comply with DPP regulations may discourage counterfeiters and other kind of rogue businesses.
7. Global Market Implications
Digital Product Passports are an EU initiative and will apply for products sold in the European Union only. Although we probably can expect similar regulations to come also in other jurisdictions, as with GDPR, it is likely that DPP-like regulations will not apply globally. At least not simultaneously.
Therefore, if you operate globally, you might face challenges of standards and regulations elsewhere not being aligned with DPP.
Also, as DPP regulations raise the bar, and the cost, it might affect competitiveness in markets outside the EU, not demanding such passports.
8. Product and Process Redesign
While the previous points are about challenges to comply with DPP regulation, the purpose of DPP is to influence design and production of products to be more circular and with less environmental impact. With consumers having easy access to comparable data on circularity and environmental impact, they are likely to shift purchasing preferences to products showing better data.
In the longer run, therefore, DPP is intended to lead to redesign of products and production processes for improved circularity and lower environmental impact.
That's the purpose of Digital Product Passports. After all, DPP is part of the Ecodesign for Sustainable Products Regulation. It's not getting introduced just to force you to scurry to provide data you hadn't thought about before.
Unless products and processes get redesigned in the long run, DPP would be a failure.
Image by mikkelwilliam on iStock
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