How Digital Product Passports Might Change Your Work in Sourcing and Procurement

If you work in procurement you're up for a big change over the next few years. Even more so if you're in sourcing. At least if your company's products are destined for the European Union, either as finished goods or as inputs to others who - in the end - deliver to the EU market.

The reason: the introduction of Digital Product Passports (DPP). Starting at the end of 2027, the EU will require all physical products sold in the EU to be accompanied by easily accessible, extensive and specified data on circularity and environmental impact, repairability, recycling/disposal and any certificates of responsible production.

In other words; such data will be as much part of the total product as functionality, quality, colour and dimensions. Without a valid DPP, your product will be unsellable.

If you don't sell finished products in the EU, but parts, components or materials destined for such products, you will still need to supply DPP data.

• Physical inputs for their physical product.

• Data inputs for the DPP they will need to provide with that physical product.

DPP data will become an additional dimension to handle, similar to price, longevity and quality.

DPP Impact on Sourcing

Probably the biggest impact on procurement will be in the early phase – sourcing – as DPP is intended to change product design to have a greater focus on environmental effects of choices made on design, inputs and production processes used.

• Is data available? When looking for suppliers for new products, it will be as important that they can provide the data inputs as the physical inputs. Do they have the data? Ready to be presented? Much of the data asked for in DPP's are things that most companies have never needed to provide up until now. Don't expect it to be "laying idle, ready, in the top drawer".

• Are the numbers good enough? The purpose of introducing DPP's is to encourage design of products that are less harmful for our environment. You will need to compare and balance things like carbon footprint, certificates of responsible production (no child labour, no forced labour, no deforestation for example), extent of repairability, extent and ease of recycling, with more familiar aspects like price, longevity, speed etc. How much will end consumers be prepared to pay extra for a smaller carbon footprint, for example? Of for being able to repair or replace parts instead of having to buy a totally new replacement?

• Is the supply of data reliable? In line with today's evaluation of the reliability and agility of the supply of physical items, you will need to evaluate the reliability, validity and quality of the accompanying data. Is their IT secure and stable? Can it integrate with your platform? Do they have reliable processes for continual updating and validation of data?

• Need for speed. Obviously, obtaining DPP data will add time and complexity to the product design process, especially initially until new routines have been established. It's probably not a wild guess that you will experience quite some pressure to cut time and increase speed. You'll probably need to use your stakeholder management skills. Over time, your shortlist of suppliers is likely to change in favour of those able to provide reliable DPP data with speed.

DPP Impact on Procurement

Although the impact of DPP might be greatest in sourcing, it will surely impact the day-to-day procurement operations as well.

• Continuous verification of data. DPP's aren't a one off. It is part of the continuous supply of the extended product.

  • Is the data kept up to date?

  • Are modifications in the physical product reflected in the data? Or modifications in how it is produced or transported?

  • Are certificates still valid?

• Have alternative suppliers emerged? Maybe with an identical physical product but made in ways that significantly reduce environmental impact, making your product more interesting for conscious consumers.

• Is the flow of data stable?

• More longer term contracts? Could it be so that the need for the supply of both goods and data to be in sync and stable will be a driver towards more long term contracts. Frequent switches between suppliers will necessitate not only changes in the supply chain for physical items but also the supply chain for data. We suppose this will tend to be in favour of longer term deals, at least for the foreseeable future.

The price might be right, but what about the carbon footprint?

Image by Thx4Stock in iStock