How Digital Product Passports Will Reshape the Platform Economy
DPPs need platforms
By some accounts 62.5 billion digital product passports (DPPs) will be created world-wide by 2030. This is an estimate for the apparel industry alone.1 Other sectors will potentially create millions more driven by a combination of regulatory mandates and technology innovation.
But DPPs do not create much value on their own. They need platforms.
Essential role of platforms
Online platforms will serve as the primary interface for accessing and interacting with DPP data, providing the means to display, search, and utilize the information contained in these digital passports. Without platforms, the valuable data within DPPs would remain siloed and largely inaccessible.
Platforms play a crucial role in translating raw DPP data into actionable insights and value for users, integrating this information into their existing systems to enhance product listings, search functions, and recommendation algorithms. They offer interfaces that make it easy for consumers, businesses, and regulators to access and understand DPP information through various means, such as QR code, RAIN RFID tags, embedded chips, and other digital identifiers.
Furthermore, online platforms can aggregate data from multiple DPPs, offering a comprehensive view of products, supply chains, and entire industries. This aggregation adds significant value beyond what individual DPPs can provide. Platforms can create entire ecosystems around DPPs, bringing together various stakeholders and unlocking new business models and opportunities. They also play a role in standardization, helping to enforce data standards for DPPs to ensure consistency and interoperability.
Finally, and perhaps most importantly, platforms support transactions between buyers and sellers, along with supporting services like payments and tax reconciliation, thereby enabling the exchange of value along the value chain informed by the digital passport.2
Core functions of digital product passports
At its core, a digital product passport is a digital record containing key information about a product's composition, origin, and lifecycle. Think of it as an item's official "papers" that follow it from production to purchase to resale, repurposing, remanufacturing or recycling. This tracing technology has the potential to become the backbone of a circular economy. Digital product passports are essentially comprehensive data records about a product's lifecycle, characteristics, and history. They act as centralized repositories of information, collecting, storing, and providing access to various types of data related to a product.
While blockchain technology is often mentioned in discussions about DPPs, it is not the only database technology option available. Alternatives to blockchain for storing the critical data associated with digital product passports include centralized databases, cloud-based solutions, distributed ledger technologies (DLTs) other than blockchain, and RFID and NFC technologies.3 Each of these alternatives has its own set of advantages and disadvantages in terms of data security, scalability, cost, ease of implementation, and interoperability.
Role of third-party DPPs providers
The impact of DPPs on the platform economy is multifaceted, affecting various stakeholders including manufacturers, online marketplaces, third-party technology providers, and consumers. For online marketplaces like Amazon, Alibaba and eBay, DPPs present both opportunities and challenges. These platforms can leverage DPP data to verify product authenticity, ensure regulatory compliance, and enhance product information displayed to consumers. They may also use DPP information to improve their algorithms for product recommendations and search rankings.
However, the rise of third-party digital passport providers introduces a new and potentially influential group of players in the eCommerce ecosystem for initial sales and resale opportunities. These companies are developing and innovating DPP technology, selling it as a service to manufacturers of textiles, batteries and a host of other products. By creating their own data platforms that aggregate and manage product information across multiple manufacturers and consumers (customer #1, customer #2, and customer #3, etc.), these third-party providers are positioned to become critical infrastructure for managing and sharing information in a world where circular multi-life-products are incentivized over “take-make-use-waste” product pathways.4
This development could potentially shift some power away from traditional online marketplaces. By controlling the flow of critical product information, third-party DPP providers may gain leverage in negotiations with both sellers and platforms. They are likely to offer value-added services such as analytics, sustainability scoring, and low friction resale, making them indispensable partners for both manufacturers and online marketplaces.5
The rise of these new players adds complexity to the platform economy that has traditionally been dominated by “linear” online marketplaces and sellers. However, it is important to note that their emergence doesn't necessarily mean a decline for online marketplaces or sellers. Instead, it is likely to lead to a more interconnected e-commerce ecosystem. Marketplaces and sellers will need to adapt and potentially form strategic partnerships with these new players to leverage the full potential of DPPs and comply with regulatory mandates.6
Implications for online marketplaces
Interestingly, online marketplaces have the option to introduce their own digital product passport systems as a service for brands selling on their platforms. This approach could offer several advantages, including standardization across all products, the creation of a new revenue stream, direct access to valuable product data, and enhanced consumer trust. However, it also presents challenges such as ensuring data accuracy, making significant technological investments and resistance from brands. Given the choice between the big online marketplaces and third-party DPP providers, manufacturers may prefer third-party providers.
The industries most likely to adopt digital product passports in the near future include textiles and fashion, batteries and vehicles, electronics and ICT, furniture, and plastics. These sectors are specifically targeted by EU regulations. However, the concept of DPPs is not limited to these industries. Any sector that could benefit from increased transparency, traceability, and sustainability reporting is likely to adopt DPPs. This could include food and beverage, cosmetics, pharmaceuticals, and construction materials.
For manufacturers and brands, DPPs offer a way to provide verifiable information about raw materials used in the manufacturing process and the sustainable sourcing and manufacture of products. This transparency can be a powerful tool for building consumer trust and differentiating products in a crowded marketplace. DPPs can also help manufacturers more accurately report on their Scope 3 emissions, which are notoriously difficult to track and verify.7
From a consumer perspective, DPPs empower individuals to make more informed purchasing decisions. By simply scanning a QR code or RFID tag, consumers can access detailed information about a product's environmental impact, origin, and lifecycle. This transparency can help combat greenwashing and build genuine consumer confidence in brands that are making authentic efforts toward sustainability.
DPPs and the Circular Economy
The implementation of DPPs also has significant implications for advancing circular economy objectives.8 They can play a significant role in facilitating the ability of products to be easily resold or "ready-to-resell".9
Third-party digital product passport providers are playing a crucial role in facilitating resale options by bridging the gap between brands, marketplaces, and end-users. These providers are developing innovative solutions that make it easier for consumers to resell products across various digital platforms.
One of the key ways DPP providers are facilitating resale is by creating standardized formats for product information. This standardization ensures that data stored in digital passports can be easily stored, transferred and understood across different resale platforms. For example, companies like Mojix are working on enabling API connections to specific resale platforms, streamlining the process of listing items for resale using information stored in digital product passports.10
Authentication and verification services offered by these providers are also crucial in building trust in the resale market. By confirming the legitimacy of products through DPPs, they're making buyers more confident in purchasing second-hand items. This is particularly important for high-value or luxury goods, where authenticity is a major concern for buyers.
Many DPP providers are focusing on creating seamless integrations with popular marketplaces that specialize in recommerce. While specific details about pre-established API connections are limited, the trend is towards developing solutions that allow for easy transfer of product data from the DPP directly to listing pages on various resale platforms. This could potentially include major marketplaces like eBay and Amazon, as well as specialized resale sites for fashion, electronics, or luxury goods.
Another significant aspect of their work is in supporting the circular economy model. By providing comprehensive product histories, including information about repairs, maintenance, and previous ownership, DPP providers are enabling sellers to offer more transparent and detailed listings. This not only potentially increases the value of second-hand items but also encourages more sustainable consumption patterns.
Some providers are also developing features for automated listing creation based on DPP information. This saves time for sellers and ensures accurate product descriptions when listing items for resale. Additionally, they're working on solutions for easy transfer of ownership when a product is resold, ensuring that the new owner has access to all relevant product information throughout its lifecycle.
While the specific implementations may vary, the overall trend among third-party DPP providers is clear: they're working to improve transparency upstream in how the inputs to products are sourced and reduce friction in the resale process downstream, making it easier for consumers to participate in the circular economy. By providing these services, they're not only supporting individual consumers but also helping brands extend the lifecycle of their products and contribute to more sustainable consumption patterns.
Looking Ahead
The impact of digital product passports on the platform economy is likely to be significant. They have the potential to reshape supply chains, alter consumer behavior, and introduce new dynamics in the relationships between manufacturers, retailers, and technology providers.
For online marketplaces, the key will be to find ways to integrate DPP data seamlessly into their platforms, enhancing the user experience without ceding too much control to third-party providers. They may need to invest in their own DPP capabilities or form strategic partnerships to stay competitive. Sellers on these platforms will need to ensure they can provide the required DPP data, which may involve significant changes to their supply chain management and data collection processes.
Third-party DPP providers, meanwhile, have a significant opportunity to establish themselves as crucial intermediaries in the e-commerce ecosystem. Their challenge will be to create systems that are interoperable across different platforms and industries while providing robust data security and privacy protections. Many will likely seek to establish platforms of their own as EON has done linking platforms and specialized service provides in a single exchange.11
It will also impact consumer behavior. The passports will provide consumers with much more detailed information about product origins, materials, and sustainability, enabling more informed purchasing decisions. The technology will also simplify authentication, reducing counterfeit risks and boosting confidence in online and second-hand purchases. As such it will make it much easier for consumers to know what they are buying and more easily participate in the circular economy by providing information on repairability, resale, and recycling options.
Conclusion
In conclusion, digital product passports are poised to fundamentally reshape the platform economy. As DPPs become more prevalent, we can expect to see new business models emerge, changes in consumer behavior, and new axes of competition and collaboration between brands, digital platforms, and third-party DDP providers. The next phase of the platform economy is likely to be more circular and more complex. It will require adaptation from all players – from tech giants to small sellers, from manufacturers to consumers. Those who can effectively navigate this new landscape, leveraging the power of product data, will be well-positioned to thrive in this new digital landscape.
Interviews with third-party digital platform providers.
Yes, the cost of production will most likely increase due to the implementation of DPP. However, this increase in price can be considered an investment in long-term sustainability and efficiency for both businesses and consumers, which can potentially reduce overall costs in the future through more efficient management and recycling of resources.
Yes, I am ready to pay 0.01 euro cents to find out where the tomatoes I buy and the cabbage are grown. 😉👍🏻