New strategies for the circular economy – sustainability and the Digital Product Passport (DPP) in the EU Green Deal

Hello Thorsten, hello Adriana. First of all, great to have you here today and welcome to the IoT Use Case Podcast. Thorsten, how are you? Where are you?

Thorsten

I am actually at home. I’ve had a great week both professionally and personally. Let’s come to the professional part first and that is the topic today, I have also given a lot of presentations on DPP to a lot of people. The topic is currently trending. That’s why I’m delighted that you’ve invited us here. Things are going really well in my private life. I’m a big podcast fan, not just because you guys make great podcasts, but I enjoy listening to others as well.

You also have a bit of private experience with podcasts, I heard beforehand, right?

Thorsten

I used to have a very active one called Trekcast, but I’m always a guest on media and especially nerd topics. I think you’re doing a great job audio-wise, really good quality. That’s important because it’s an audio format, so you need good equipment.

For all listeners right now, Thorsten also has a microphone in front of him. Looks very well equipped. We also see each other here with video, so that’s very nice. You were also a guest on episode 101 with the company Neoception. Also on the subject of the Asset Administration Shell, listen to it if you want to hear Thorsten in this role again. You mentioned it, DPP. Today we are talking about the Digital Product Passport, what exactly it is and what it means. That’s why I’d like to welcome Adriana to the discussion. It’s great that you’re here today. Where are you right now? Are you also at home?

Adriana

First of all, thank you very much for the invitation. I’m delighted to be here today and to be recording this podcast. I am in the office of the German Economic Institute in Berlin today. We have our main office in Cologne, but I have a small team here in Berlin so that we are close to politics. Because my main topics are climate change and digitalization and from these topics, the Digital Product Passport has also become my topic.

Very nice. Adriana, you’ve been with the German Economic Institute since 2004, having completed your economics studies at the University of Augsburg. You’ve also had international experience, in Dublin, Ireland, and now focus on topics like the Green Economy, Circular Economy, Resources, Energy and Environment, as well as the thematic cluster of Digitalization and Climate Change. You have been involved in some exciting publications. I hope we learn more about this today.

Adriana

The background to this was that not many people were dealing with this at the time and after ten years at IW Consult, the subsidiary of IW, I switched to a more specific topic after I had dealt with many issues there. I decided to focus on environmental issues. I majored in environmental economics during my studies in Augsburg and have returned to my roots. There were colleagues working on energy and climate issues, so I decided to focus on raw materials and resources.

Interesting. By circular economy, do you mean the entire product life cycle, from the design and optimization of products to new business models? What is the general understanding of the cluster in which you work?

Adriana

Exactly, I like to use the English term when we talk about a circular economy because it is somewhat broader than the German word Kreislaufwirtschaft. In the German tradition, the circular economy is really just recycling or what I do with waste. When we talk about a circular economy in the new sense, we are talking about this entire product life cycle. I think about whether I can recycle my product right from the design stage.

The German Economic Institute is a private economic research institute in Germany, which is an advocate of a liberal economic and social order. Your task is to improve understanding of economic and societal interconnections to some extent, especially when looking at the big picture. Perhaps that’s a bit of background. I believe many of today’s listeners are from the industry, perhaps having some starting points but not necessarily deeply involved in the day-to-day business.

Adriana

Yes, I would definitely agree with that. This is also stated in our vision and mission. We differ from other economic research institutes in that we do not carry out basic research, but primarily conduct applied research and want to explain it in an understandable way, be it for the media, politics or companies, so that everyone can understand the core of a topic.

[06:20] Challenges, potentials and status quo – This is what the use case looks like in practice

Yes, and now it’s particularly exciting in the constellation with the two of you. Thorsten, you are the Managing Director of ECLASS and the association behind it. How did you come together? Why are you both here today?

Thorsten

ECLASS has its office at the German Economic Institute. The two companies have been closely linked for 24 years. I mainly benefit from my colleagues in the IW, including Adriana, because ECLASS, as a provider of a digital, semantic standard, requires the translation of political specifications and economic contexts. I am not an economist, but an information systems specialist. I only understand a lot of what Adriana researches and works on after she has explained it to me. But that’s a good thing, because I can give quick feedback on how things work operationally or how IT systems need to be designed.

You have already touched on the subject of semantic standards, which may sound somewhat abstract at first. We will take a closer look today. You have been successful since 2000, also internationally, and operate as a non-profit organization with members from companies, associations and institutes as well as various industrial sectors. You are developing a leading digital data standard for product descriptions that is perhaps comparable to a USB plug. Are you dealing with a standard that is specifically aimed at assigning certain product properties?

Thorsten

You can imagine it like this: Many of my customers would grill me right now if I simplified it like this. But suppose you are a manufacturer and list all product information in an Excel spreadsheet. We take care of the column headings. We standardize exactly what is necessary to describe your products: Length, width, height, rated voltage, weight, color, cooling temperature and other properties. These are individual for each product so that we can provide a unique description structure for each product manufactured worldwide. This then extends to the databases of the ERP and PIM systems. Why is it important? People want to exchange data within and outside the company, and it is clear that the third digit, for example, is always the length in centimeters and the fourth digit is always the color according to RGB code. We define exactly how this information is transported semantically.

Fantastic, and I will come back to this in the next step. In order to tackle this issue, the EU has, I believe, introduced this Digital Product Passport as part of the Green Deal in order to make it really effective and also make a contribution to the economy. Adriana, this is where you come in. This is the intersection, so to speak, on which you are working together with ECLASS on this topic.

Adriana

Exactly, we realized last year that we were working on the same topic, but from different perspectives. We have been working on the European Green Deal for a while now, and the digital product passport has been discussed in environmental committees involving company or association representatives for some time. This proposal has existed since the EU Ecodesign Regulation. However, as far as Thorsten’s approach is concerned, there is as yet no concrete proposal in this regulation as to what this should look like. Technical requirements are formulated in this regulation, which has now been adopted. But many are still puzzled about what this will look like in practice. I have been to numerous meetings where companies have asked: What do we actually have to do? And this is where Thorsten can really help with ECLASS.

Could you perhaps explain to us what exactly the European Green Deal entails? I believe you also have a publication in this area. Could you explain why? Why is this important and why are we talking about it today? I think you can share some more insights here before we get into the topic.

Adriana

Yes, gladly. In principle, the European Green Deal is the European Union’s growth strategy, taking into account our climate targets. In the EU, we want to become climate-neutral by 2050, in Germany even by 2045. So we have even more ambitious goals. How can this be achieved? We need to reorganize the economy. The European Union has come up with numerous measures to support this transformation process. This includes the EU Circular Economy Package, which aims to turn the EU into a circular economy. We want to make sustainable products the norm. We are moving from a linear economy to a circular, cycle-oriented economy. This does not happen overnight; many processes have to take place. Companies must invest in climate-friendly technologies, especially if the climate aspect is a priority. Or we need to think about new business models: no longer selling, but perhaps renting. The product remains my property and I get it back to recover the raw materials. These are the ideas behind it.

Okay, and about the Digital Product Passport: as I understand it, all the relevant information about a product is recorded digitally by various manufacturers and then made available for reasons of transparency. That still sounds a bit abstract. Can you explain this in more detail, perhaps using a specific example? As far as I know, the battery passport already exists. Could you shed some light on this? What exactly does this mean in practice? What does it contain?

Adriana

Breaking down information silos is truly important. Every company has data on its products, but others who may continue to work with the product or recycle it do not. The aim is to increase transparency so that everyone involved can treat products in the life cycle in the most climate- and resource-friendly way possible.

Thorsten

From the perspective of small and medium-sized companies, I am looking at over 100 pages of legislation and regulation. Adriana helps me to understand what is meant, but I don’t have a solution yet. Hence an analogy: our passports contain basic information such as eye color and citizenship, but also volatile information. Every time you travel outside the EU, your passport is stamped. This shows where I have been in the life cycle of the passport and my travels. Every individual in Europe thus has a passport with master information, to which further information is added in the course of the life cycle. The situation is similar with the Digital Product Passport (DPP). There is unchangeable information such as the manufacturer and data that is recorded during the life cycle of the product. This can be interesting for a manufacturer from France who only sells products from France to ensure a low carbon footprint. At last there is transparency in the products. But the question remains, what exactly should such a passport look like?

Do you have a few exemplary use cases of how this can be applied to the industry? Adriana, you mentioned the topic of material composition and recycling. What are the classic use cases that are particularly relevant for industry?

Thorsten

The EU wants to start with batteries, followed by textiles and then electrical appliances, mainly household appliances such as washing machines.

And by batteries, do you mean the product, the battery that comes onto the market and is described with certain product features?

Thorsten

Exactly, from our smartphones to disposable batteries and electric vehicles, rechargeable batteries are everywhere. The industry uses a lot of battery-powered equipment, which has a wide range. A battery is an energy-intensive product with raw materials that come from far away. That’s a fitting example. We actually have various use cases here: firstly, engineering – where do the materials come from, what kind of products are they exactly? Then there’s purchasing, sales, where I want to offer my customers a particularly environmentally friendly product, and finally the end customer, who also plays a role. For me as a consumer, it makes a difference whether a product has been produced locally and in a climate-neutral way or whether it has been imported from the Far East by plane and may still contain harmful substances. As an end customer, this influences my purchasing decisions. This transparency is therefore important. It is about the use case data exchange, preferably without loss of information and without friction.

This means that depending on which manufacturer or company I am, I probably have different application scenarios. Battery passports could then be consumer-driven, for example, but the topic of recycling and material composition, as well as type plates, the topic of maintenance, are also use cases that companies need to consider, right?

Thorsten

The nameplate is one of the three building blocks in our solution that Adriana and I developed to define how the whole thing should look. This also includes maintenance – where do I buy my spare parts, how does dismantling work, repairs and so on. This is also a social issue. Adriana has indicated that we have increasingly become a throwaway society. Products are rarely repaired, for a variety of reasons. But if I can repair it, it’s probably more environmentally friendly.

Okay, I have understood the use cases. The vision of the policy is to create transparency and establish a unified product passport, which can be accessed and where data can be viewed. What could such a digital product passport look like? Adriana, perhaps you can say something about this – from a political perspective, what could such a standardized product passport look like?

Adriana

That really is still an open question. Background: There are already numerous individual solutions in which product information is recorded in databases, especially for harmful products or chemicals. It’s not as if the companies have done nothing so far. There are many individual approaches. The energy certificate for buildings also already exists. However, there is a lack of a comprehensive product passport for all sectors and products. We must bear in mind that this also affects the industry. What does eco-design actually mean? The EU Ecodesign Regulation requires sustainable products to become the norm. But what do we mean by that? Ecodesign means designing products to be as resource and environmentally friendly as possible. This regulation sets out clear requirements for products in order to avoid waste, save resources and make products repairable and recyclable. That is why transparency is so important. The Digital Product Passport is a key instrument for policymakers to enable this transparency. It’s difficult to realize in detail how a unified product passport might look. Pragmatism should therefore also play a role in an implementable solution. You can’t capture everything.

You have mentioned various players and companies that are already contributing a lot. Who are the players and stakeholders affected by this issue? I could imagine that educational work is needed, for example by chambers of industry and commerce, but also by others. Which actors and stakeholders are affected exactly?

Adriana

Virtually all of them, because with a few exceptions, such as in the food sector, almost all product groups are affected. It is a comprehensive topic and not only large companies are affected, but everyone has to deal with it. Just yesterday I was talking to tradespeople; for smaller companies, access to the digital product passport will once again be crucial, especially if they need to carry out repairs.

And now, looking at the data – since it’s also the IoT Use Case Podcast, we talk a lot about data and its processing. But let’s go back to the challenges and difficulties, because companies already have data. So there must be an enormous amount of different data and solutions. What are the challenges or pain points for the companies to be able to solve this at all?

Adriana

As part of our report, we asked ourselves how prepared companies actually are for the Digital Product Passport. The Digital Product Passport has content requirements, as I have described, but also technical ones. Our digitalization experts have found that the German economy is not as advanced in terms of digitalization and efficient data management.

Are then just Excel tables perhaps or somehow different…

Adriana

Many analogue documents are merely digitized, i.e. scanned, which does not constitute real data management. A survey conducted by my colleagues revealed that only three out of ten companies are truly data economy ready, i.e. can really manage data efficiently. You can store and manage data well and use it intelligently. So what do we do with the data? We need to be able to analyze and network them. And I think there is still a lot of room for improvement. There is also a need for action in terms of content requirements. The German economy is excellent when it comes to producing durable, high-quality products – the classic “Made in Germany”. But there is still room for improvement when it comes to upgradability or reparability, as this has not been at the heart of the business model to date. The idea is also to initiate new business models. One positive effect of the digital product passport could be that I have information available to better help my customers and perhaps also improve cooperation with my suppliers.

Thorsten

Our raison d’être stems from what Adriana has aptly described. The data already exists, but is very proprietary. Some of them can be used within the company, but there are problems with data exchange. Different units lead to confusion, length is confused with width, cooling temperature in Celsius and Fahrenheit leads to data clutter. ECLASS is indispensable for precisely this purpose. Semantics determines the structure required to understand data. Systems need to communicate with each other, because people need to be able to read the data, but it is the communication between systems such as ERP, PIM and IoT that is important. Adriana and I were among the first to take this approach: an identifying part – who is the producer, and a descriptive part – what are the functions and specific characteristics of the product. Because a battery is different from a T-shirt. All environmental and life cycle-relevant data is also included. What is my product life cycle, what are my components, my CO2 footprint? Is there environmental pollution? How is the product recycled or dismantled? All these things can actually be mapped with ECLASS. But that is not enough. Our idea: a standardized data container. That’s why the reference to episode 101 is a good one, as it features an Asset Administration Shell. You had Christian Mosch on the podcast, who offers this standardized data container, the Asset Administration Shell, and this combination will be the solution. Adriana and I were pleased; this is also what ZVEI states in Germany. They align precisely with the architecture Adriana and I advocate, emphasizing these three components within an Asset Administration Shell, utilizing ECLASS, and then enabling work to proceed. That will not be the solution, but it will be one of the solutions, because data exchange and transparency are important.

Okay, to summarize: Many companies in Germany do not yet meet the requirements for implementing the Digital Product Passport. ECLASS offers an approach for identifying and describing the necessary data and supplementing it with environmental and product life cycle data. This applies to all types of data, regardless of their nature in the production process?

Thorsten

That is correct. Data is generated during the manufacture of the product, from the purchase of components to quality assurance. New data is added at various points in the manufacturing process. The environmental information, for example the CO2 footprint and the material properties of the screws, are incorporated into the refinement of the product and form new instances of this data.

[26:07] Solutions, offerings and services – A look at the technologies used

If you want to approach the topic in a structured way for your company and work with you, it would be helpful to understand how ECLASS works as a standard. Perhaps you could explain how this works using a few use cases. Could you first explain how the ECLASS solution works in general? So technologically speaking? Please give us an initial idea of what ECLASS means and what it can achieve.

Thorsten

Now I come back to this somewhat limping example with the Excel table headings. First you need to determine what type of product it is. ECLASS can describe 44,000 different product types, from screws to airplanes. After defining the product type, this determines the so-called characteristics, i.e. the specific Excel column headings to describe this product correctly. There are more than 28,000 such features in the ECLASS standard, and they are unique. The length, for example, is assigned to almost all products, as is the weight in grams. Other characteristics such as rated voltage or explosion protection do not apply to every product.

So, you have defined the categories and headings. If we take the example of material composition for recycling, this means that all data for this use case is already prepared in a standardized way to ensure a common understanding.

Thorsten

Correct. If something is missing, it can be added, because ECLASS is an open standard. The updates come from industry experts, mainly from Europe. We have more than 60 active working groups from the industry that collect improvements and missing information. There is an annual update that is completely machine-processable, with migration documents, XML, JSON, RDF and all other serializations to make integration into different systems flexible.

Here again the reference to episode 101, you are not working alone, but with partners, software companies, end customers and above all with many medium-sized companies to jointly define the standard.

Thorsten

Exactly, because that is also important. We have many hidden champions in Europe, in Germany and France, who need to be brought in. They are all there and that is important, because they manufacture the preliminary products, such as special sensors, gearboxes, electronic components and medical goods. This is Europe’s strength: innovative and highly refined products.

When it comes to IoT, my technological side comes into play. You work with software companies such as Neoception and others who implement the standard in a standardized way. You mentioned the Asset Administration Shell as a container. Various partners help the companies to process the data. It offers a standard and a partner ecosystem that prepares and provides the data, depending on which software partner a company chooses.

Thorsten

Correct. From small, specialized software providers to SAP and Dassault Systèmes.

If you are interested, please contact Thorsten or Adriana. I will link their LinkedIn profiles in the show notes where further details can be clarified. But now a question about the business model. You are an association, but there is certainly a business model behind it. Is the offer free of charge for the recipient, i.e. the end customer? Do they have to pay anything? What is the pricing like?

Thorsten

The rule of thumb is: the manufacturer has to license it, the recipient gets it free of charge.

Okay, that means the manufacturer licenses the standard for itself and its Digital Product Passport and works with various or one software partner. Okay, and that is then defined for the recipient, who then applies it for themselves, so to speak?

Thorsten

Exactly, let’s stick with the battery example. There are around 100 standards and 150 ECLASS features. As a battery manufacturer, there are various ways of acquiring these. Individual features cost around 5 cents once. So when I license my battery products, I have to pay a few euros. The recipient of my battery product pass can enjoy it, because it is free of charge for him. However, anyone who integrates the battery information into an electric car, such as Audi, BMW or Tesla, must license the information for the car, as they are manufacturers. The person describing the product must acquire a license. But we’re not talking about thousands of euros here, but amounts in the euro and cent range.

Right. It is a unique opportunity to create a basis via a standard instead of each company starting on its own and going down different paths. It is crucial to merge data silos and establish a uniform standard instead of having thousands of databases in different formats. This is also your European initiative to drive this forward and to really focus on the standard that brings all of this with it, plus the ecosystem that can actually implement and realize it.

Thorsten

That’s why I still have one more thing to brag about. CEN and CENELEC, which are the European standardization bodies, have been requested by the EU to draft the technical standards for the digital product passport in order to make the legislative text translatable. They asked us, don’t you want to take part? Don’t you want to design this standard because you are experts in the field and we now have an official seat on this CEN-CENELEC committee and say that if a product passport is required, it has to look like this in technical terms. Of course we recommended to go for standard here. It does not necessarily have to be ECLASS; there are also other standards. But without a uniform standard, the costs of translating the data from the silos would be too high.

Exactly, and then we also have the chance to establish a stable European standard to solve various use cases and strengthen Europe’s position, right?

Adriana

It should not be underestimated that high costs reduce acceptance. It is the manufacturers or distributors of products who fill in the digital product passport. You should see this not only as a burden, but also as an opportunity. Existing global data standards offer a good starting point, as they are often linked to systems already in use. I assume that the EU is not trying to reinvent the wheel.

Yes, it makes sense to build on existing standards instead of starting from scratch. Adriana, it was great to meet you. Torsten, we already know each other from the network. This episode was intended as a teaser to introduce the topic and provide practical insights. I have a thousand more questions, but we can answer them offline. The audience can also contact Torsten and Adriana if they have any questions. It is an important initiative to use the digital product passport to meet the requirements, create transparency, trust and traceability and at the same time promote sustainability and environmental protection. Thank you very much for today’s session. I leave the last word to you.

Thorsten

Thank you, Madeleine. Thank you for the invitation. See the digital product passport as an opportunity, as an introduction to digitalization and to strengthen Europe’s position in the world.

Adriana

Yes, I can only agree with that. There is still a lot to do. We do not live in a perfect world. I didn’t want to give the impression that we are not digitized enough to raise concerns. But we need a good balance between sharing information and the benefits we derive from it. Many companies do not share their data because they are concerned that it is not sufficiently protected. There is a spirit of optimism and a great deal of interest. I hope that we can continue to provide support and make a contribution with our reports, which explain this in an understandable way.

Yes, you definitely could. A nice finish for today. I hope you have a great week. Take care, ciao! Bye!

Adriana

Thank you. Bye.

Thorsten

Bye!