The Digital Product Passport: curse or opportunity for SMEs?

By Karl Haeusgen
Karl Haeusgen is President of the German Engineering Federation. The VDMA represents around 3,400 German and European companies in the mechanical engineering industry.

It is one of the most important initiatives in the EU Commission’s new circular economy package, which is planned for the first quarter of 2022. In theory, the idea of the Digital Product Passport (DPP) is a good one: In the future, companies will document all the substances used in their products. They name spare parts and calculate the CO2 footprint of their actions. This will make processes more transparent and give products sustainability criteria. In this way, the circular economy can be advanced.

This may also work for the production of a T-shirt or a hairdryer. The less waste we produce and the more products are integrated within a functioning circular economy, the more we protect our planet and contribute to sustainability.

However, the problem with such a regulatory idea, as envisaged in the EU’s Digital Product Passport, is that it puts different industries on an equal footing. Consumer goods such as clothing or small electronics should neither be equated with complex machinery and equipment nor be subject to the same rules. Unlike consumer goods, capital goods are always repairable, upgradable, often reusable, and have a lifespan of 20 years or more. Therefore, it is clear: There must not be a one-size-fits-all solution for all industries under the Digital Product Passport.

Complex supply chains

Mechanical and plant engineering is an export-oriented industry, operates on global markets, and is part of complex value chains. A machine, which is usually a product tailored to special customer requirements, consists of thousands of components and lots of input from external suppliers. Collecting all this data in the Digital Product Passport would be too much for small and medium-sized companies in particular. Neither machine manufacturers nor their suppliers can provide all the data along the complex supply chains in everyday practice.

And the necessary support from policymakers is also lacking: For example, there are no freely available tools for calculating the carbon footprint that take into account the specific needs of the industry. Here, policy objectives and entrepreneurial reality drift far apart. There is a threat of bureaucratic chaos, rising costs, and overlapping reporting obligations, for example, with the SCIP database, which already identifies substances of concern in products.

Success through industry involvement

How can the Digital Product Passport still be a success? After all, the EU Commission’s basic idea of only bringing sustainable and recyclable products onto the European market is right and important. Also, in order to achieve the climate goals of the Green Deal. Everyone – whether citizens, companies, or industry – can make a contribution here.

For mechanical and plant engineering, the circular economy has been a megatrend for some years now. We produce machines that are not only used for decades but are also returned to the cycle as material. From the reuse of components and the use of state-of-the-art recycling technology to the optimization of our own production processes – mechanical engineering is essential for a functioning circular economy. Utilizing this potential and driving innovation must be in the interest and task of politics.

In order to achieve the required climate neutrality of the economy, we, therefore, need much more dialogue between politics and industry. The mechanical and plant engineering sector is ready for this. We want to get involved in the conception of the Digital Product Passport and, together with the EU, find ways that are also viable for the numerous hidden champions within Europe.

Done correctly, the Digital Product Passport is not only a step towards more climate protection but also an instrument that enables new business models and allows learning effects for the industry. In this way, it could actually become an added value for the mechanical engineering industry and an opportunity for all SMEs.

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