Are you ready for the European ESPR directive?

The issue of sustainability has long been high on the agenda of nations around the world, and its importance shows no signs of waning. Since the Paris Agreement, efforts to implement new initiatives that galvanize sustainable development have multiplied and strengthened, but many of them have still not reached or impacted the daily processes of small and medium-sized enterprises.

Taking Europe as an example; In 2020, 4.8 tonnes of waste were generated per EU inhabitant, of which only 39.2% was recycled. The EU is starting to make companies putting their products on the market more responsible by encouraging them to participate in creating a circular economy. The Ecodesign for Sustainable Products Regulation (ESPR) is a framework that sets “ecodesign requirements for specific product groups to significantly improve their circularity, energy performance and other aspects of environmental sustainability “. As part of this first step, this will impact a range of industries, including but not limited to textiles, steel and electronics, which will need to attach digital product passports (DPP) to all products they place on the EU market.

Tech entrepreneurs should take note that while the mandate will certainly impact large companies, the draft regulations also mention that small and medium-sized businesses will also have to comply.

Digital Product Passports (DPP) and their role in ESPR explained

A DPP is a digital record that can contain essential data about a product’s identification information and life cycle. This is accessible via a digital medium such as a barcode, a QR code or an NFC label attached to the product in question.

It can contain many different types of data, but in terms of relevance to ESPR, DPPs can host data on the carbon footprint of the product’s manufacturing process, the materials used to produce it, where the replacement parts can be obtained, and most importantly, how to responsibly dispose of or recycle a product when it reaches the end of its life.

Increased awareness of this information should encourage consumers to reduce their waste and recycle more, and encourage companies marketing products to the EU market to adopt more sustainable practices. This is why the DPPs constitute a central element of the regulation.

Although the exact data and requirements are yet to be confirmed, the EU has already set out priority sectors such as batteries for which it plans to implement a form of DPP (battery passports) by 2027, while other priority sectors such as textiles and electronics are expected to be required to comply by 2030. As the regulation will also apply to any product placed on the EU market, it will prove have a global impact.

The hidden growth potential of businesses

While compliance is the primary reason some businesses adopt DPPs for the first time, for businesses striving to create, maintain and grow a customer base quickly and successfully, they can be one of the best tools to support successful sales and open new revenue streams.

Due to their accessibility, DPPs provide a direct channel for businesses to interact with their customers and start building customer loyalty quickly. Additionally, the data collected by DPPs could even help evaluate products in circulation, and therefore sales trends and indicators, which in turn can help businesses track their inventory, plan sales events and to better understand the needs of their customers.

Coming back to compliance, they can also be used to support other ESG-related initiatives – such as extended producer responsibility – by providing more information on how or where to repair items. where to eliminate them. They can even facilitate compliance with other ESG regulations such as CSRD. DPPs are truly a tool that can support a multitude of uses.

How do tech company leaders prepare?

As clear requirements and a precise timeline have yet to be finalized, companies have a window of opportunity to act now. All businesses are encouraged to begin initial preparations, but priority industries that are particularly vulnerable to the mandate are encouraged to begin preparations as soon as possible.

For businesses starting from scratch, the best first step is to appoint a DPP lead or team to lead compliance efforts, and their first priority should be to seek to understand everything they can about the current regulations and what will be defined. in the near future. After that, you should have a clearer idea of ​​what needs to happen to inform a clear strategy that starts with finding and organizing data points.

For time-poor tech entrepreneurs looking to both stay ahead of compliance and find new opportunities to grow a successful business, taking the time now to take stock of the upcoming mandate will be time well spent.

Author

Lars Rensing, CEO of Protokol, brings over four years of expertise in the blockchain industry. As a seasoned CEO, he co-founded Ark and serves as vice chairman of its supervisory board, fostering innovation and leadership in blockchain technology.