When there is a disruption in the supply chain, organizations have some choices to make. The passive option is to take no action and wait to see how the situation resolves. Many companies cannot afford to wait, though, and they will try to do something to bypass the disruption and get their goods or materials where they need to be as soon as possible. Some companies use a disruption as an opportunity to take stock of their supply chain. They might make changes if they recognize a consistent weak link or if they find that they are working with an organization that doesn’t align with their values.
That kind of transparency requires companies to dig into the data. It is not information every organization has readily available. There are new regulations on the way in the European Union, though, that might change what to expect from supply chain data. Here’s what the introduction of Digital Product Passports (DPP) means for companies around the world, and how data plays an important role in the initiative.
What are DPPs?
A Digital Product Passport (DPP) is meant to provide complete transparency into a product from its source all the way through the end of its life. The information about the product can be accessible to manufacturers, anyone performing any kind of repair during the product’s lifecycle, and customers.
Last year, the European Union introduced the Ecodesign for Sustainable Products Regulation (ESPR) framework. DPPs are an important part of ESPR, making sure products are as environmentally friendly as possible for as long as possible. If legislation is passed according to plan, DPPs will be required of different products over the next five years.
Benefits of DPPs
DPPs provide transparency into supply chains, and they give customers the sustainability information they are looking for in certain products. Customers can scan a product and, if it has been previously owned, see where it came from and whether it has been repaired. They are empowered to make better buying decisions that can improve sustainability practices. Companies can meet regulatory requirements more easily, knowing exactly how a product has been sourced, and they can check that those sources align with their own goals, whether those involve sustainability or issues like worker welfare.
In addition to providing simple transparency, DPPs encourage a circular economy. Rather than throwing a product away after use, DPPs will help encourage the reuse and recycling of products. For some companies, this might mean a need to shift to more of a service and repair business model. For the recycling industry, there will be clearer information about a product’s materials, helping to streamline processes.
The role of data
While digital product passports are not required right now, all signs indicate it is certain to impact a number of industries soon. Those industries include electronics, textiles, battery makers, and construction, among others, and organizations within those industries need to act now to make sure they are prepared.
Much of the information is what companies already have readily accessible – make and model, manufacturing date, warranty information. But then there’s the information that goes into more detail, such as the origins of the raw materials involved in making a product, or identifying the suppliers moving materials from one place to another.
While DPPs depend on data gathering, organizations can also benefit from an analytics solution that can take that data a step further. Companies can use the information to develop programs that help them benefit from their sustainability practices, perhaps rewarding customers for their recycling and using the information to improve loyalty programs. In a climate where organizations are constantly working to optimize their supply chains, being able to track a product throughout its life cycle offers a lot of the data they need to make better business decisions.
Just like people can’t walk into another country legally without their passports, products will not be able to be sold in the European Union without a digital product passport. So even though this is an EU regulation, it is a practice that manufacturers around the world are going to need to comply with in some way. Instead of seeing it as a burden, organizations should value the transparency it offers them. Data can help them identify and unlock the opportunities that come along with that transparency.
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