DPP is an EU thing. But how about the rest of the world?

From 2027, the European Union will start requiring products sold in the Union to be accompanied by Digital Product Passports (DPP). The DPP regulation requires sellers to provide extensive information on circularity, environmental impact, repairability, recycling and disposal, and certificates of ethical production practices.

As we've covered from different angles, preparing and providing DPP's will involve a major effort and bring major change to business operations.

DPP is specific to goods sold in the EU

These regulations apply only to goods sold in the EU, not across the rest of our globe, although they will also impact producers across the world who produce components and raw materials that go into such products. That said, you can expect the EU DPP regulation to have repercussions in business all over the world, the main exceptions being business working only locally.

The question is, will DPP impact also how business handles production for products sold elsewhere than the European Union?

Will they do an EU version and a "rest-of-the world" version of their goods?
Will DPP "rub off" on how they do business across the board?
Or will they shy away altogether from dealing with the EU because they think the regulation is too cumbersome to apply?

Which factors speak for the different approaches?

The relative importance of the EU

Imports of products to the European Union constitutes 15% of global trade. Finished goods, intermediate goods and raw materials. But the impact should be wider than so as all producers of raw materials and components to those imports also will need to provide DPP data to their customers to enable them, in turn, to provide complete DPP's to EU customers.

So, we suppose an important factor in the decision will be "how big a slice of your business is impacted by the EU DPP regulation. 15% is a portion of business that few companies (or their shareholders, for that sake) would be happy about losing. If your sales to the EU or into supply chains for goods to the EU is insignificant, you might be tempted to go for alternative 3. Especially if it would be very cumbersome and expensive to provide the DPP data destined for the EU.

Which brings us to the next factor.

Complexity and cost to provide DPP data

We can expect the complexity and cost of providing DPP data to vary depending on industries and manufacturing processes.

If the cost is higher to dig out and maintain the data than the cost of losing the EU sales, it could be tempting to go for alternative 3. Such an approach, however, means to shy away for the foreseeable future of selling anything to anyone that might sooner or later end up in a product destined for the EU market. Looking at the last factor (below) that might well mean restricting yourself to a gradually shrinking market.

If the costs are high, but still less than the cost of losing the EU market, you might decide to choose alternative 1. To provide DPP data to the EU, but not elsewhere.

The Brussels Effect

Recently, complaints have been voiced by Brexiteers in UK protesting against having to deal with the screw corks that stay attached to the PET-bottles. "We didn't leave the EU to still have to abide by their silly rules!" they lament.

That may be the most recent example of the Brussels Effect (also called regulatory convergence): The EU impose regulations that screw caps shall stay attached to the bottle to avoid them littering cities and the countryside, to be recycled with the PET bottles.

Manufacturers conclude that it is less costly to use the same packaging also in other countries than to separate production for EU and non-EU. And Brexiteers have to put up with "European screw corks"

The reasons for companies to apply the strictest rules from one market across the board are:

It's often more efficient for companies to have a single production standard
It reduces compliance complexity and risk
It can be a marketing advantage to claim adherence to the highest global standards

Regulation "migration"

Regulations have a tendency to spread. Maybe especially regulations aimed at protecting consumers, citizens and the environment.

One example is GDPR, another EU regulation. Similar regulations have subsequently been introduced in: California, Brazil, Japan, Canada, South Korea, Thailand, India, South Africa, Nigeria, Israel, Turkey, Argentina, Uruguay, New Zealand and Switzerland.

Companies applying stricter regulations across the board may very well do so to be prepared for similar regulations being implemented elsewhere. Instead of having to repeat the compliance effort in one jurisdiction after the other, they get it over and done with across the board and can claim to be conscious early starters in subsequent markets.

Do you know how you will deal with DPP for non EU markets?

Have you thought about it yet?

You probably should.

The DPP regulation being introduced at end of 2027 will only apply to products sold in the European Union. As providing DPP's for finished products sold in the EU, DPP data will also be required for all raw materials and components used to make those products. The reach will therefore be much greater than at first glance. Regular convergence (a.k.a. the Brussels effect) is likely to lead to it being applied much wider. — How will the EU DPP regulation impact on businesses across the world? On yours?

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