On 30 March 2022, the European Commission published its long-awaited Circular Economy Package, including the Sustainable Products Initiative (SPI), a communication laying out Brussels’ vision for a greener Europe. Within the package, the SPI aims to improve the circularity and longevity of goods by transforming production processes and reducing related energy consumption.
One of the main measures of the SPI initiative is to replace the current Ecodesign Directive with an ‘Ecodesign for Sustainable Products Regulation’ (ESPR). The dual aim of this measure is to cover the largest possible range of products placed on the EU market and to enlarge the scope of requirements with which products must comply. In practice, this means that the ESPR will be wide-ranging and cross-sectoral. It will exert high pressure on businesses, either by establishing completely new product-specific rules such as for textiles or by complementing existing product-specific rules such as for packaging and chemicals.
As part of the initiative, the EU Commission is set to introduce a digital product passport (DPP) for goods regulated under the ESPR, going far beyond the current EU ecolabel – also subject to revision. The Commission’s ultimate objective is to provide businesses and consumers with better and more transparent information on environmental performance, labelling and greater opportunities to prolong product lifetime. Strongly linked to the digital transition, it’ll ensure products are tagged, identified, and associated with relevant data on circularity and sustainability along the value chain.
Reactions and process:
- Environment Commissioner Virginijus Sinkevičius presented the European Circular Package, including the SPI, to MEPs, which broadly welcomed the proposals, despite asking for more specifics.
- While the initiative currently targets relatively broad product categories including electronics, textiles and chemicals, the exact requirements for specific products will be detailed during secondary legislation, known as “delegated acts”. Recently, several MEPs, EU officials and third-party stakeholders expressed concern over these delegated acts, criticizing their horizontal and one-size-fits-all approach, insisting the Commission will use it to “micro-manage” new rules.
- Digital product passports will leave room for a wide-ranging set of opportunities and issues. For instance, the associated risk of enabling comprehensive tracking of products’ origin and CO2 content, is the failure to protect sensitive business data.
- Holger Lösch, the deputy chief executive officer of BDI, said that while the sustainability criteria are welcome, they “must also apply to manufacturers from third countries and be independently verified when imported.”
In practice, industries will be broadly impacted and their production on the EU market under high pressure by consumers and other actors across the value chain. However, some sectors are likely to be more heavily affected than others, such as the chemical and packaging industries which will face additional environmental rules to the existing ones.
Chemicals
For the chemical sector, the ESPR will allow the restriction of chemicals within products to improve environmental performance along lifecycles. These extra set of actions will need to be carefully considered when added to existing law governing chemicals, such as REACH, the primary focus of which is ensuring chemical safety, or RoHS, covering only electrical and electronic equipment.
Packaging
The main requirements allowing packaging on the EU market are established in the Packaging and Packaging Waste Directive (PPWD), currently under revision. However, packaging varies greatly depending on the product category, which will be a key aspect to consider when developing product-specific ESPR regulations. Such rules will need to carefully complement the existing requirements laid down in the PPWD to ensure consistency and avoid overlap across legislations.
Textiles
In parallel, other sectors such as the textiles industry will face brand new rules, going beyond the ESPR, as established in the EU Strategy for Sustainable and Circular Textiles. While fashion businesses will also be subject to product passports, EU regulation will also introduce strict requirements on the design of garments, on the restriction of the export of textiles waste and Extended Producer Responsibility, among others.
Business implications:
- The initiative highlights the need for additional investments.
- Numerous technologies will be involved in the digital passport process, meaning supply chains will experience heightened control, taxing and tracking based on carbon content and environmental impact.
- While finalizing the legislation, the ESPR will come in addition to other climate measures like the ETS and CBAM, rendering the EU market more competitive and feeding into environmental standards within global trade.
- With improved product lifetime and increased access to the right to repair and reuse of products, the second-hand market and sharing economy will boom, opening up a myriad of opportunities.
- Proposed measures will provide more options for consumers to make informed choices and compare products of the same category, going far beyond the current energy consumption labels in the electro equipment field
By Dariusz Dybka, Director, and Kelly Piron, Senior Analyst, Edelman Global Advisory, Brussels
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