In the future, many products sold in the EU will need to have a digital product passport containing important information about the product’s entire lifecycle. The aim is to concretize the EU’s circular economy goals.
Over two years ago, the Finnish heavy-duty handling equipment manufacturer Kalmar joined a pilot funded by Sitra. The purpose of the pilot was to introduce a digital product passport for batteries, which provides information on the materials used in the battery, their origin, the environmental impacts of the materials, how the battery should be recycled, and its reuse possibilities.
“In addition to the battery’s identity information, the digital product passport includes data on how the battery has been charged and discharged,” says Kalmar’s Research Director Pekka Yli-Paunu.
Other leading Nordic work machine manufacturers also joined the pilot. In addition to Kalmar, the main partner in the pilot was Sandvik, a manufacturer of mining machines.
As a result of the pilot, Kalmar came up with the idea of using a QR code to identify the batteries in machines. The code makes the lifecycle of the machines transparent to both the manufacturer and its customers and partners.
The EU’s Ecodesign Regulation requires that almost all products sold in the EU will need to have a similar digital product passport in the future. In addition to batteries, the requirement will first apply to products such as iron, aluminium, and steel products, as well as textiles, furniture, detergents, and electronics. It is estimated that the digital product passport will become mandatory for these products between 2026 and 2030.
Benefits for both environment and for business
“The digital product passport provides information on everything that has happened to the work machine during its lifecycle. Therefore, the passport facilitates and rationalizes the use and repair of the machine, as well as the reuse and recycling of its parts and materials,” says Päivi Luoma, Gofore’s Leading Management Consultant for Sustainable Business.
The goal of the product passport is to guide companies to produce more environmentally friendly and durable products and to encourage companies and consumers alike to make more sustainable choices. At the same time, the product passport offers companies the opportunity to develop their business.
“Companies can offer new types of services related to maintenance, upkeep, or usage support to their customers,” says Luoma.
This the essence of servitization business opportunities that might well be the future business model scenario of heavy industry companies.
This has also been done at Kalmar. Pekka Yli-Paunu says that they joined Sitra’s pilot because it was clear that it would bring many benefits to Kalmar.
“We have improved data collection and storage, and the data related to the machines is now easily accessible. This also significantly facilitates the preparation of the sustainability report. Manual work is no longer needed to compile the report.”
Data enhances product development
The digital product passport is also beneficial for product development, says Yli-Paunu.
“We collect valuable information from all the machines leaving the factory, which provides a strong foundation for product development. When we know how and in what environments our customers use the machines, we can understand the conditions and challenges they face.”
In addition, machine maintenance becomes easier when the digital product passport can provide information on how the machine has been used and maintained in the past. At best, it extends the lifespan of the machines and helps determine their value for potential reuse.
According to Yli-Paunu, some customers have initially been protective of their data. When it was clarified how Kalmar uses the data, many customers understood the benefits of data collection and sharing. With the data, Kalmar can produce better and more suitable machines for customers more quickly.
“Customers’ eyes often open when we can show them, for example, how much their machines are waiting, why this is happening, and how we can optimize the use of the machines as efficiently as possible,” says Yli-Paunu.
Data collection requires cooperation of the entire value chain
When it is known what kind of data is needed for the digital product passport and where it can be obtained, it is time to consider what kind of system can manage, verify, and share the data sensibly and securely.
“Each product must have a unique identifier, such as a QR code, which contains all the necessary data. The data must be machine-readable and based on open standards,” says Luoma.
The type of data required varies somewhat by product group. According to Luoma, important data includes information on the product’s origin, manufacturing, carbon footprint, recyclability, and what has happened to the product during its lifecycle.
Luoma points out that Finnish companies are often part of international supply chains and service packages. For example, a battery, device, or component may be delivered as part of a machine or device. In such cases, the pressure to collect and share data may come from the customer.
“Visibility into the product’s value chain often requires the cooperation of value chain actors. Everyone must be ready to do their part, but the benefits are shared by all,” says Luoma.
Preparing for the introduction of the digital product passport will be worth its while
Like Kalmar, some Finnish companies have already started preparing for the digital product passport. Although the need for the product passport will materialize gradually and by product group, Luoma encourages all companies, regardless of industry, to prepare for the requirements of traceability and transparency now.
“I recommend that every company identify the new opportunities that the digital product passport offers for business. It is important to understand what is essential for us and our customers.”
The digital product passport brings together a lot of existing data. Many companies already have information on the carbon footprint, origin, maintenance, and disposal of their products. Therefore, not everything needs to be started from scratch, but the work can also involve compiling existing information, Luoma reminds.
Yli-Paunu also encourages companies to take action. Getting started can be very agile with the help of IT houses, he says.
At Kalmar, the first product passports are already in trial use, and they are now considering how to fully utilize the collected data. According to Yli-Paunu, there is still a lot of untapped potential in the collected data. He gives the example of electrification, which is a significant change in the industry. It involves a lot of new data that can be utilized when modelling systems for simulations, says Yli-Paunu.
“Modelling can tell us, for example, how much battery capacity and how many charging stations are needed for the machine, how powerful the batteries need to be, and where they should be placed. In addition, we need to calculate the average power required by the system and the peak power needed. We also need to consider and calculate how electrification will affect our customer’s production in other ways.”
Where to start?
Clarify needs and requirements from a business perspective: What product groups and products does the digital product passport apply to? How does such transparency support our strategy? What new business opportunities and value creation possibilities does the passport offer us and our customers?
Create a picture of the required and existing data: What kind of data is concretely needed for the product passport? What data do we already have, and what is missing?
Discuss with customers and suppliers: How can we ensure the availability and quality of the necessary data together? What practices and systems do we use to ensure data sharing? Are there already common standards and practices in our industry that we could utilize?
Clarify the solutions required by the product passport: What is the right way for us to identify products? What kind of system is needed to manage and share the data? How do we ensure confidentiality and data security?