The European Union is getting serious about sustainability and is already working towards ‘becoming a modern, resource-efficient and competitive economy where there are no net emissions of greenhouse gases in 2050 and where economic growth is decoupled from resource use.’ They aim to tackle over-consumption and reduce carbon emissions and waste by driving manufacturers to create “longer-lasting products that can be repaired, recycled and re-used.” The European Green Deal was approved in 2020 and is a set of policy initiatives put in place to achieve that goal. One of the initiatives is the EU Ecodesign for Sustainable Products (ESPR) regulation for the majority of products by May 2024. But what is this regulation and how does it affect importers?
Note: The EU ESPR proposal document is referred to and quoted from throughout.
Background on why and how the EU is becoming more sustainable
The EU shared this sobering statement in their Circular Economy Action plan (CEAP):
“There is only one planet Earth, yet by 2050, the world will be consuming as if there were three. Global consumption of materials such as biomass, fossil fuels, metals and minerals is expected to double in the next forty years, while annual waste generation is projected to increase by 70% by 2050.”
Clearly, the way things are going isn’t sustainable for Europe or the world, hence the EU taking action. Climate change is here and it isn’t going away, it seems like we get bad news almost every week. For example, heavy rains and flooding caused by severe weather have killed a lot of people in India and Bangladesh this week (June 2022).
While current steps are having some effect, it’s not enough…
“EU initiatives and legislation already address to a certain extent sustainability aspects of products, either on a mandatory or voluntary basis. Notably, the Ecodesign Directive successfully regulates energy efficiency and some circularity features of energy-related products. At the same time, instruments such as the EU Ecolabel or the EU green public procurement (GPP) criteria are broader in scope but have reduced impact due to the limitations of voluntary approaches. In fact, there is no comprehensive set of requirements to ensure that all products placed on the EU market become increasingly sustainable and stand the test of circularity.” (Emphasis ours.)
Note that the ‘Ecodesign Directive’ is mentioned here. A directive is not the same as a regulation in the EU. A directive is something that each member state will have to transpose in their national legal codes, preferably very closely and very fast, whereas regulation is immediately the law and is mandatory as soon as it is implemented. As of now, some energy-related devices are the topic of a directive that got officially published in 2009, but what happens when this is rolled out to many/most consumer products being sold in the EU?
What is the EU Ecodesign regulation?
The European Commission is preparing an ambitious new Ecodesign for Sustainable Products Regulation. It is currently at the stage of a proposal and hasn’t yet been confirmed by the Council or voted into law by the Parliament, but it is already a well-advanced draft and it is not likely that very substantial changes will be made.
There is currently an Ecodesign Directive and an Energy Labelling Regulation (mentioned earlier), but their scope is going to be extended “beyond energy-related products so that it covers the broadest possible range of products and helps achieve a circular economy”.
The objectives of the Ecodesign for Sustainable Products Regulation
The EU Ecodesign regulation aims to tackle the way products are designed, materials and components are used, supply chains are set up, and more by focusing on the following (circular economy action plan):
- improving product durability, reusability, upgradability and reparability, addressing the presence of hazardous chemicals in products, and increasing their energy and resource efficiency;
- increasing recycled content in products, while ensuring their performance and safety;
- enabling remanufacturing and high-quality recycling;
- reducing carbon and environmental footprints;
- restricting single-use and countering premature obsolescence;
- introducing a ban on the destruction of unsold durable goods (something that several corporates have been caught doing);
- incentivising product-as-a-service or other models where producers keep the ownership of the product or the responsibility for its performance throughout its lifecycle;
- mobilising the potential of digitalisation of product information, including solutions such as digital passports, tagging and watermarks;
- rewarding products based on their different sustainability performance, including by linking high performance levels to incentives.
Is the final text available?
The regulation is not law yet, so specific requirements per product category aren’t 100% clear right now.
The Ecodesign for Sustainable Products Regulation provides a high-level framework of what is going to be required. This means that there won’t be a one-size set of requirements for all products which, logically, makes sense, as different product types have different behaviors. For instance, some products are well-known to be over-packaged, and the use of ‘too much’ packaging has become an industry norm for them. In a case like this, the regulation may well specify that less packaging of a more sustainable nature is to be used.
“These ecodesign requirements will be tailored to the particular characteristics of the product groups concerned,” the European Commission wrote in this communication.
How is the EU Ecodesign for Sustainable Products regulation likely to affect importers?
Bearing in mind the regulation’s goals, in order to comply with all of the above by May 2024, most European importers will have some work to do in order to assure that their products are designed with a focus on “product durability, reusability, upgradability and reparability, the presence of substances of concern in products, product energy and resource efficiency, recycled content of products, product remanufacturing and high-quality recycling, and for reducing products’ carbon and environmental footprints”.
As such, you will need to focus on:
- Auditing your entire supply chain (including sub-suppliers who supply your assembly supplier) to have a clear understanding of what materials, components, and production processes are involved and how sustainable they are.
- Getting visibility over your Bill of Materials could be difficult if working with the wrong kinds of suppliers who may be unwilling to release that information, so you may need to assess whether your current suppliers are suited to your need to comply with Ecodesign and its product passport requirement.
- Designing new products with a focus on sustainability by implementing ‘Design for X’ guidelines to optimize your products to comply with the regulation while causing “no significant negative impact on the functionality of the product, from the perspective of the user.” Redesigning existing products may be even more challenging.
- Urgently sourcing more sustainable production materials and packaging.
Will the USA, Canada, Australia, etc, follow suit?
It’s fair to assume that other Western nations and areas will follow the EU’s lead, as the awareness of reducing carbon emissions and improving sustainability is high across the West.
Products imported into the USA already need to be traceable and labels will often include manufacturing date, manufacturer or importer name and address, location, SKU, batch number, and other information.
The USA is pushing ahead with the Uyghur Forced Labor Prevention Act (UFLPA) which bars products that are made or have materials from Xinjiang province from being imported. Including this extra information is a step towards implementing enhanced product traceability, an integral part of the EU Ecodesign for Sustainable Products Regulation. Is it unrealistic to assume that including full supply chain and material/component information will be rolled out to most products in due course using a form of product passport? Probably not.
Canada has a 2030 agenda for sustainable development which includes responsible consumption and production as one of its central points. They already have energy efficiency and environmental protection acts in place, like the EU. These have an effect on product design and sustainability, but it seems logical that they will also follow the ESPR in some way soon.
The Australian government also puts emphasis on responsible sourcing right now and has committed to reducing greenhouse gas emissions by 43% by 2030. Their new government is taking the environment seriously, and so, again, increasing scrutiny of supply chains and sustainability of products would seem to be a sensible next step, especially if the ESPR is successful.
What’s the product passport?
The product passport is an interesting requirement of the regulation because this changes how businesses report what goes into a product and how and where it’s made.
The EU Commission states that the product passport is:
“an important tool for making information available to actors along the entire value chain and the availability of a product passport should significantly enhance end-to-end traceability of a product throughout its value chain. Among other things, the product passport should help consumers make informed choices by improving their access to product information relevant to them, allowing economic operators and other value chain actors such as repairers or recyclers to access relevant information, and enable competent national authorities to perform their duties. To this end, the product passport should not replace but complement non-digital forms of transmitting information, such as information in the product manual or on a label. In addition, it should be possible for the product passport to be used for information on other sustainability aspects applicable to the relevant product group pursuant to other Union legislation.”
It’s relevant to the ‘Empowering consumers for the green transition initiative’ to improve information on products at the point of sale in particular on their durability and reparability, and help prevent greenwashing and premature obsolescence.’
How is the information provided and policed?
This information will be made transparent to both customers and market surveillance authorities via, likely, a QR code or scannable watermark on the product itself (not packaging alone so product information remains accessible for the duration of its lifetime), and will probably include information such as energy consumption, sustainability of materials and production, repairability score of the product, where it was made and by whom, and more.
The information will be entered onto a single registry accessible to customs.
“The role of customs should be to ensure that the reference of a product passport is made available in the customs declaration and that this reference corresponds to a unique product identifier that is stored in the registry. This would allow the verification by customs that a product passport exists for imported products.”
The EU Commission is serious about making information more transparent for all products being imported into the EU, so the days of not needing to know about your wider supply chain are numbered:
“Digital product passports will be the norm for all products regulated under the ESPR, enabling products to be tagged, identified and linked to data relevant to their circularity and sustainability. Pioneering this approach for environmental sustainability data can also pave the way for wider voluntary data sharing, going beyond the products and requirements regulated under the ESPR. Moreover, product passports may be used for information on other sustainability aspects applicable to the relevant product group pursuant to other Union legislation.”
Bad actors who knowingly use non-compliant materials, components, or suppliers (such as perhaps those from sanctioned countries or areas) for products being imported into the EU will have nowhere to hide and are more likely to be caught and brought to justice, too.
Will the product passport be damaging for IP protection?
Some importers are understandably worried that the product passport will help others infringe on their product IP by making their products’ technical documentation, BoM, supply chain information, and more, available to competitors. The Commission says this in the ESPR proposal:
“[The product passport will need] to take account of the nature of the product and its market, the information to be included in the product passport should be carefully examined on a case-by-case basis when preparing product-specific rules. To optimise access to the resulting information while also protecting intellectual property rights, the product passport needs to be designed and implemented allowing differentiated access to the information included in the product passport depending on the type of information and the typology of stakeholders.”
This means that measures may be put in place where consumers only have access to information that affects them, such as product sustainability, safety, manufacturing location, etc. Whereas market surveillance authorities are given enhanced access to more proprietary information, such as the different players in the supply chain, component makers, etc (which businesses would not like to fall into the hands of their competitors).
How could green claims be affected?
Many companies make green claims about their products and business practices. But how reliable are they, really?
The regulation will clamp down on companies who have been ‘greenwashing’ their reputations by making spurious claims about their products’ sustainability, perhaps by abusing voluntary non-inspected eco certifications without truly putting in the work or telling the truth about certain points, in order to claim that they or their products are ‘green’ will now no longer be able to get away with such behavior.
“The upcoming Commission initiative on Green Claims will also complement measures in this legislation, by increasing the reliability, comparability and verifiability of environmental claims about products, via requirements that such claims be substantiated and verified using life-cycle analysis methods.”
Therefore, you need to seriously question whether you’re going to be able to provide supplier and product information that proves that you’re able to make green claims before they can be made and put on product labels, packaging, etc. (This information will also be in the product passport).
“Will the products we manufacture be affected!?”
The short answer is, yes.
The exceptions to this are food, feed, seeds, and animal and human drug products which have their own regulations already.
The longer answer is, that almost all products sold in the EU will have to comply with the Ecodesign regulation. The regulation is coming into force by 2024 for most, but it’s already being staggered by product category. The EU is focusing on product types that have the most severe potential to damage the environment, starting with energy-related products, and then targeting textile products and certain construction products since they represent the “most significant impacts on the environment and climate”. We believe consumer electronics will be targeted shortly after that. Certain types of batteries are also regarded as a high priority, too.
The current EU commissioners are not known for their leniency in cases like this. The EU Medical Device Regulation went into effect, despite the strong requests of most notified bodies who complained they and their clients were not ready. The Commission has already made it clear in the European Green Deal that they see improving the continent’s environmental impact as an urgent priority, so we can expect the regulation to become law soon.
How to comply with this regulation?
Large businesses are already taking steps to redesign products, source and manufacture more sustainably, and get better control over their supply chains so they can provide the necessary information for the product passport.
Even if you are not a corporate, now is the time to re-evaluate your product and supply chain-related risks, do a gap analysis, and make a compliance plan for the EU Ecodesign regulation.
It’s a lot to take in.
By May 2024, you could be faced with products being seized by customs at EU ports if they don’t comply (which is easily checked in the product passport or if there’s a lack of one).
That’s why at Sofeast we’re already supporting clients to investigate and assess their compliance risks and put in place the changes needed to sourcing, supply chains, and product design in order to comply with the EU Ecodesign for Sustainable Products Regulation.
You can explore the solution and get a quotation for your project here: EU Ecodesign Regulation Risk Assessment & Preparation