Digital: The circulation catalyst

The circular economy needs data. A huge amount of information is needed before a product can be reused or repaired or its raw materials recycled.

The digital product passport, as stipulated in the Ecodesign Regulation agreed by the EU in December 2023, plays a crucial role in providing this information to all those involved in the value creation process. The digital product passport will contain all the relevant data about a product, including information on reuse, repair and recycling options, as well as environmental impacts.

While this data is already recorded, up to now it has been stored in the individual companies’ databases. The digital product passport (DPP) will free the data from these silos, merge it and make it more readily accessible. This includes both static data created after the manufacture of a product and dynamic data, i.e. information that changes over time. In the case of a battery, for example, this would be the number of charging cycles. The passport therefore accompanies the product over its entire life and contains all data. It can be understood as a kind of digital twin: a digital replica of a physical product.

Decision-making aids for consumers

For the circular economy, the digital product passport could act as a catalyst for making processes more efficient and simplifying decisions about how a product is handled.

Anna Preut, who works in the Sustainability and Circular Economy department at the Fraunhofer Institute for Material Flow and Logistics (IML), explains what this means in concrete terms. “Let’s say a consumer stops using a product because it is broken or no longer needed. That consumer can then use information from the digital product passport to help them decide what best to do with the product from an environmental perspective. Should it be handed to a local waste disposal company or sent back to the manufacturer?” Operators of recycling plants would be able to optimize their sorting processes thanks to the additional information about the materials used.

Better availability of data could lead to an annual reduction in CO2 emissions of 12.3 million tons by 2035 in the automotive industry alone, and also ensure improved recycling of 5.4 million tons of materials and the recovery of greater volumes of important raw materials, according to the European Commission.

Those unconvinced by the environmental benefits of the digital product passport should consider the economic potential. “Access to detailed product information means companies can better tailor their offering to customers’ requirements. This will lead to completely new business models for products and the circular economy,” writes Henning Meyer, Director for Cloud Transformation & Sustainable IT at consulting company Capgemini, in a blog post. Data availability and transparency along the supply chain will also help boost efficiency, leading to cost savings and optimized production processes. “In the automotive industry, for example, these effects could generate an estimated €1.8 billion of net profit by 2035,” says Meyer.

“When products are disposed of or passed on correctly after their usage phase, they can be refurbished for re-introduction onto the market or used as source materials for new products” says Fraunhofer expert Preut. “As a source of information for digital delivery notes, the digital product passport can also support reverse logistics processes and spare parts deliveries.” This not only helps avoid unnecessary shipments but also lengthens a product’s life – a win for both the environment and the economy.

Working hard on standards for the digital product passport

However, there is still much to be done before this potential can be tapped. The VDE DKE-supported Standardization Council Industrie 4.0 is working with experts from industry and research to develop a concept for the DPP. The preferred model is DPP 4.0 with a system architecture based on the principles of Industrie 4.0. This model aims to enable a decentralized, federated DPP that is open to all technologies and prevents dependence on individual providers.

As a result, manufacturers will be able to create an infrastructure that merges required and voluntarily provided product data – including that from suppliers – and makes it available in the DPP. This includes, among other things, the installation of a rights management system, which manages who can access data. Without this, it is practically impossible to ensure that sensitive information – such as production secrets – does not leave the company. A solution is also required for integrating the dynamic data, which is continuously produced over a product’s entire lifetime.

There are also the standards that DKE is involved with. These address, for example, the management of access rights, the technical, semantic and organizational interoperability and data exchange protocols, data formats and data storage. “Part of the standardization process involves ascertaining what standards already exist and where they overlap. In the special case of the EU single market, it is also necessary to clarify which of them need to be harmonized,” explains Dr. Marvin Böll, Project Manager at VDE DKE. This work is scheduled for completion by 2025.

According to Böll, standards are a prerequisite for interoperable solutions, and thus an important precondition enabling small and medium-sized companies to implement the DPP cost-effectively. However, for smaller companies in particular, providing the systems required to supply information of the necessary quality internally as well as ensuring that the dynamic data is also included in the product passport could pose a major challenge. “The European Commission therefore envisages that a kind of service provider ecosystem will emerge around the DPP to help companies meet the requirements – for example providers of ‘DPP as a service’,” says Böll. The German Act on Corporate Due Diligence Obligations in Supply Chains has shown that regulatory requirements can lead to this kind of ecosystem. As a result of this legislation, a number of startups have already been founded to offer companies solutions for gathering the required data. To avoid a fragmentation of the EU market, it is therefore important to agree on common standards, according to Böll. This will facilitate joint efforts towards the circular economy.

Markus Strehlitz is a freelance journalist and editor for VDE dialog.