This article originally appeared in the January/February 2025 issue of Startups Magazine. Click here to subscribe

Despite this growing awareness, many companies remain uncertain about the practical steps required for compliance – particularly in relation to the legislation's Digital Product Passport (DPP) mandate.

As this mandate is set to come into force for multiple industries and product groups over the coming years, the first and most critical step involves identifying and validating the necessary product and environmental data to inform Digital Product Passports – a process that can be more challenging than it initially seems.

Moreover, although specific requirements pertinent to each industry are yet to be announced (via the delegated acts), conducting these steps early can significantly simplify the compliance journey for all businesses, including startups and small firms.

Driving economic circularity in the EU: the movement and its business impact

In recent months, awareness of the ESPR has increased significantly among EU-based businesses and those operating in the EU market. As part of the EU’s Circular Economy Action Plan (CEAP), the ESPR plays a pivotal role in advancing sustainability by aiming to make ‘sustainable products the new norm in the EU.’

The regulation emphasises product longevity, energy efficiency, ease of repair and recycling, reducing harmful substances, and integrating recycled materials into the manufacturing process. It is worth noting that the legislation’s DPP mandate, as it stands, will apply to SMEs who place products from affected industries on the European market. On this, the European Commission will be looking to provide SMEs with appropriate support ahead of compliance, alongside evaluating the potential impact. Although it is worth noting, it is not clear what this support will look like yet.

Industries with substantial environmental impacts, such as textiles and ICT, will feel the regulation’s impact the most. However, the mandate applies to any business placing products on the EU market, regardless of their location.

As already noted, the DPP mandate stands at the cornerstone of the ESPR. In simple terms, Digital Product Passports are a digital record that track a product’s lifecycle and capture critical data, including transactional, sustainability, and product lifecycle information.

Although specific guidelines related to the type and granularity of data that will need to be included are yet to be finalised, businesses should begin preparing by collecting and validating data on their products' environmental impact. This process can be complex, as data is often fragmented across multiple systems within a company’s value chain.

A comprehensive approach to data collection and validation is essential for companies to establish a robust strategy for complying with the ESPR’s mandate for DPPs.

The following steps provide a clear and structured pathway for preparing your business for the DPP mandate.

Engage key stakeholders to assess your position and readiness

All businesses should begin by working closely with stakeholders across the supply chain, such as suppliers, manufacturers, and logistics partners. This collaboration is crucial for gaining a holistic understanding of the product data available. Moreover, these interactions can uncover previously hidden insights and foster discussions to enhance data transparency and accessibility throughout the value chain.

Given that some SMEs might not have the resources available for a dedicated ESG function within the business, employing ESG or DPP consultants to help conduct a DPP Readiness Assessment, DPP workshop, consulting, or other activities could prove particularly beneficial.

Conduct a data gap analysis to pinpoint missing information

After identifying existing data, it's recommended to conduct a data gap analysis, focusing on the elements likely to be required in a DPP, even before specific guidelines are released. This might include data on waste generated during production or the carbon footprint of manufacturing. T his analysis will help pinpoint gaps in product environmental data within your business, allowing you to determine how best to address them. Solutions may involve implementing measurement tools or partnering with new stakeholders to support data collection and accuracy.

The need for a Life Cycle Assessment (LCA) Audit to effectively fill data gaps

Once data gaps are identified, the next priority should be conducting life cycle assessments (LCAs). This process evaluates the environmental impact of a product throughout its lifecycle, starting from raw material extraction, offering a comprehensive understanding of its sustainability footprint.

Ensure data source accuracy for confidence and reliability

As businesses navigate their data compliance journey, it is crucial to validate data sources to create an accurate and verifiable representation of each product. This means assessing the credibility of third-party data suppliers, and ensuring processes are underpinned by the relevant standards.

Evaluate DPP solutions to ensure seamless integration

Due to the complexity, building a DPP solution won’t be a viable option for most businesses, so they will need to seek out suitable partners who specialise in the creation and implementation of DPP solutions with their specific challenges in mind.

With the implementation of DPPs being central to compliance, assessing how data needs to be inputted, and the resource required to ingest data into the DPP system is critical to considering the capture and storage of data in the correct formats. Businesses should also consider whether the DPP solution can integrate with existing systems and how it creates an ongoing real-time picture of a product’s lifecycle.

Initiating pilot programmes for testing and assessment

After evaluating the market for a suitable DPP solution, one that fits the size of the SME and its needs, the next phase is to pilot the implementation process of data capturing. This allows businesses to test their strategy, providing valuable insights into the scale and timing required for full deployment. Through the pilot phase, companies can fine-tune their approach, ensuring they are ready for the final requirements once the delegated acts are released. As highlighted, successful compliance with the EU's ESPR depends on a strategic, systematic approach to collecting, validating, and integrating product data throughout the supply chain.

The road to compliance success

While awaiting the release of the delegated acts brings some uncertainty, businesses can simplify their journey to DPP compliance by focusing on actionable, manageable steps they can take today. Building a robust compliance strategy rooted in accurate data and trustworthy validation processes not only ensures alignment with ESPR requirements but also drives enhanced sustainability and operational resilience for responsible businesses.