As businesses face emerging regulations on product safety, sustainability, and ethical sourcing, Digital product passports will become crucial for navigating these challenges. DPPs provide a streamlined, digital way to document a product’s entire lifecycle, making it easier to ensure compliance and improve transparency. For companies operating globally, quick access to accurate product information can help avoid penalties and maintain trust.
The Compliance Landscape Surrounding Traceability
Various regulations demand the use of digital product passports. In other cases, DPPs are a better solution to existing compliance requirements.
The Uygher Forced Labor Protection Act prohibits the importation of goods made wholly or in part with forced labor into the United States across a company’s multi-tier value chain. Enforcement of the Uygher Forced Labor Protection Act began in 2022 and is already being strenuously enforced. Since enforcement began, over 12,600 shipments have been detained. These shipments were valued at $3.7 billion. 5,400 of those shipments were denied entry into the US. While different types of solutions are being employed to comply with UFLPA, these solutions do not always prevent cargo detention. This is a very difficult regulation to comply with! A digital passport enables much more vigorous compliance.
Starting in 2027, the European Union will implement a new regulation requiring nearly all products sold in the EU to feature a digital product passport. EU Digital Product Passport aims to enhance transparency across product value chains by providing comprehensive information about each product’s origin, materials, environmental impact, and disposal recommendations. The DPP is designed to close the gap between consumer demands for transparency and the current lack of reliable product data.
A DPP can also help customers get a head start in meeting regulatory requirements like the Corporate Sustainability Due Diligence Directive, which is also currently targeted to go into effect in 2027. This directive aims to ensure that large companies contribute to the green transition towards a climate-neutral Europe and actively identify and address human rights concerns within their operations and across their global value chains.
There is no guarantee that the EU’s regulations will go into effect in 2027. These kinds of regulations tend to face legal challenges and other forms of pushback. There is also speculation in the trade compliance community that the Trump administration may not enforce the UFLPA as strenuously as it has been enforced up until now.
But Brian Carelli, vice president of sustainability and partnerships at Infor, has a different perspective. The European regulations will happen eventually. Further, some consumers want this information, and some of the most prominent retailers are interested in brand protection. Mr. Carelli said, “they don’t want to wake up one morning and see a Wall Street Journal article that says they have forced labor in their supply chain.”
Last June, Infor launched Map and Trace. That solution empowers their customers to map their supply chains and collect documentation from multiple supplier tiers. Map and Trace provides evidence of chain of custody compliance with regulations such as the UFLPA. This is often done after a shipment has been held up at a port, and the importer of record needs to prove that no prohibited entity is in their extended supply chain.
But a shipper may have a shipment detained, go through the work of documenting the end-to-end value chain, and get the cargo released. Then, another detention can happen again a few months later. Supply chains change. Suppliers get swapped out. From the Customs and Border Patrol’s perspective, just because a shipper previously proved there are no bad actors in their supply chain, that does not mean that is still true.
Mr. Carelli said, “We are starting to see an inflection point from ad hoc tracing, on an as-needed basis or for a small percentage of imported goods, to tracing at scale.”
Infor’s New Digital Product Passport Solution
Providing authorities with comprehensive information about each product’s origin, materials, and environmental impact is meaningless if you can’t prove who is in the extended supply chain! That means proof needs to be offered for every shipment.
Infor released NexTrace, a digital product passport solution, earlier this year. The DPP solution takes its capabilities to the next level by proactively gathering full-scale item-level traceability from each tier of the supply chain. This will require collecting massive amounts of data!
Bills of lading will need to be collected at each tier of the supply chain. Bills of lading prove what was sold between two parties at the lot, batch, or item level. A Tier 4 company that makes yarn needs a BOL from a Tier 5 cotton manufacturer, a Tier 3 fabric mill needs the BOL from Tier 4, a Tier 2 apparel manufacturer needs the Tier 3 BOL, and so forth.
But BOLs are just the beginning of what is required. They establish what was sold in bulk but not how distinct products were produced. BOL data may need to be combined with data from an ERP (the bill of material or BOM), a warehouse management system (what was scanned into a factory warehouse), a manufacturing execution system (a record of how goods were manufactured), and other systems as well. And this needs to be done at all nodes in the supply chain.
Adding to the complexity, the nomenclature used by suppliers and buyers is different. So, the system needs to be able to document the flows using a standard taxonomy. Historically, participants across the supply chain would have been asked to use EDI or a portal to get the data into standard fields. That could never work; it would be like herding cats. Compliance would be negligible. Fortunately, generative AI has come of age and large language models can be trained to do these transformations in a way that requires minimal human participation.
Then, this traceability information must be made usable by the CPB and other compliance authorities. The authorities want to see a chain of custody diagrams that explains the end-to-end flow. Finally, all this information must be collected in a platform and made accessible when and where needed.
All of this is what Infor Nexus is doing with their NexTrace solution. This really is impressive.
Final Thoughts
There will be a lot of suppliers claiming to offer digital product passports. ESG solution suppliers, consumer tag makers, and other point solutions will all be needed to provide a total solution. However, a solution like NexTrace solves the most complex problem by proving the provenance of every actor in the end-to-end supply chain for each product produced.
Blockchain providers claim that they offer solutions for this. Blockchain, which is computationally intensive, can’t scale to handle the kind of massive data flows a holistic DPP solution will encompass.
A collaborative multi-enterprise supply chain network is the right platform for this. NexTrace runs on the Infor Nexus MESCN platform.
Infor will have future competitors. However, the only serious competitors will be from other suppliers of MESCN.
