16 Feb
CONTEXT
The European Commission is currently discussing the details of the Digital Product Passport (DPP), which will enable improved transparency around the regulation of certain products, including car batteries and luxury and electronic goods. This Passport could be enacted in the coming years and will allow consumers to obtain transparent and detailed information about the products they buy.
This report, co-written by Arianee and BCG, is a contribution to the reflection that has taken and will take place in the framework of the discussions around the European regulation of the Digital Product Passport. It aims to show the extent of the possibilities that could be unlocked by this new tool and encourage its adoption.
This report is the result of a collaboration between BCG and Arianee and is based on discussions between experts from both parties, comprehensive desk research, analysis of available third-party reports and interviews with experts and brand representatives.
EXECUTIVE SUMMARY
What is Digital Product Passport?
The Digital Product Passport (DPP) is a project initiated by the European Commission that aims to create a digital passport for products in order to provide consumers with transparent information about the origin, environmental impact, and safety of products.
• As per latest information released by the European Commission, the DPP should provide consumers with transparent and detailed information about the products they purchase, to promote sustainability and circularity and to enable regulators to easily access and verify product information, which will help to ensure compliance with regulatory standards
• DPP implementation will start with car batteries, followed by the textile industry, construction products and electronic goods, etc.
What are the benefits of Digital Product Passports?
Our analysis shows that DPP can cover a wide spectrum of benefits, including and beyond the transparency on upstream product information (current focus of the European Commission), to help accelerate transition towards circular economy
• DPP can accelerate a consumption revolution by unlocking 5 main utilities: an access to product information, a certificate of authenticity and ownership, a product lifecycle management tool, a CRM tool and a virtual replica of a physical object
• Based on experience, any increase in DPP utilities is likely to foster adoption and usage of the DPP and must then be encouraged to ensure its success
What are the components of a Digital Product Passport?
DPP implementation requires to progress on three key components:
• Physical identifier: a QR code, RFID chip, etc., on the product or its packaging which should have a harmonized and internationally recognized standard, and be unique for each product
• Data storage and access system: a reliable platform, which ensures trust, confidentiality, easy access to the data and unlocks utility beyond pure access to upstream product information
• Harmonized standards: a set of taxonomy and layout principles for collecting and encoding the information in the DPP
What are the different architectures for DPP data?
The report identifies three main architectures for the storage of, and access to, DPP:
• Centralized DPP: passport data stored in centralized databases
• Permissioned blockchain based DPP: Passport data stored on a private or consortium blockchain and only accessible to platform members
• Tokenized DPP: passport data stored in an NFT imprinted on public blockchain
Which product categories are targeted for DPP tokenization?
DPP tokenization is targeted first at high perceived value/long life B2C products, but it should not stop at this product category
• No/Limited fit for low value / low durability products
• Early adopters expected among high perceived value/long durability B2C sectors (especially in the fashion and luxury industry) given cost/benefit analysis and ability to align incentives between brands and the European Commision
• Tokenization should then be used to extend the durability and value of other target product categories
What are some of the key challenges and tasks that need to be addressed by different stakeholders in the implementation of DPP tokenization?
It's not an easy road ahead and several subjects still need to be discussed and solved by each stakeholder
• The regulator will have to decide on the granularity of the DPP across all the target industries and create incentives to promote the implementation and interoperability of the relevant technologies
• Brands will need to evaluate the technology architecture that maximizes the utilities (or use cases) they want to achieve through DPPs. In addition, they will need to carefully think about future customer journeys leveraging DPPs to boost circularity
• Technology providers will have to improve the scalability and interoperability of DLT (Distributed Ledger Technology) by providing a simple and cost-effective solution and by developing user-friendly tools to access the blockchain
• All stakeholders will have to work on technology acceptance by educating customers and staff on blockchain and its use
Learn more in this comprehensive study:
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