Luxury brands adopt digital passports to comply with new regulations

Time is running out for luxury brands to comply with a new European Commission regulation called Ecodesign for Sustainable Product Regulation (ESPR), which will come into force this year. The aim is to make transparency and traceability a regulatory requirement for luxury brands manufactured and/or sold in Europe.

To meet new regulations, luxury brands are turning to digital product passports (DPP), which link physical products to a digital identity. In a report from the Aura Blockchain Consortium and Deloitte, titled “Adopting Digital Product Passport as a Regulatory Requirement: Setting a New Standard for Luxury,” the report’s authors said that DPPs function “as a digital link between product, owner and brand,” while integrating and preserving information across the entire product lifecycle.

The report notes that DPPs meet the needs of consumers, luxury brands and government regulators. “There is therefore an opportunity to use DPPs to create value for brands and consumers, while anticipating upcoming regulations,” the report said, also noting that the ESPR has accelerated the adoption of DPPs, “which will soon become a standard. It’s a necessity, and brands that adopt DPP sooner will be better prepared.

In addition to transparency and traceability, DPPs also provide protection to luxury brands and consumers. Franck Le Moal, chief information officer of the LVMH group, said in the report that the world of luxury is a challenge; “We face many issues regarding counterfeiting, explaining the true history and origin of the products. The Digital Product Passport is a powerful complementary tool to track products from start to finish and demonstrate to customers that they can trust us.

DPPs also enable “product story telling,” which has become a differentiator in the luxury goods market, the report said. “From a downstream perspective, DPPs can help drive new direct revenue by enabling more comprehensive product storytelling and deeper brand experiences,” the report authors said, adding that when they are deployed with the right communications strategy to properly convey value to customers, “product storytelling appears to lead to a significant increase in prices of luxury products.

This includes providing information on traceability and sustainability before the sales process, which influences the purchasing decision and increases conversion rates. Additionally, allowing transparency “after the sales event builds customer trust and brand loyalty,” the report’s authors said.

Lorenzo Bertelli, Prada Group’s head of marketing and CSR, said in the report that labeling a product “and enabling digital storytelling is a great conversation starter for sellers in our stores.” This increases conversion rates and ensures the customer verifies ownership of their product, creating a new direct engagement channel that has never existed before.

And there are other benefits too.

The report states that from a luxury brand’s perspective, DPPs can generate many value-generating applications, including enhancing a product’s storytelling “with valuable insights into sustainability, circularity and traceability” and the guarantee of authenticity and legitimate ownership of a product, thus combating counterfeiting and theft. This also makes it possible to generate richer data throughout the customer’s life, “to better understand how they use and interact with their products”.