From Compliance to Sustainability and the Demand for Digital Transformation
The requirements of product stewardship teams are in the midst of a rapid transition.
Traditionally, the role of product stewardship teams has been predominantly focused on ensuring compliance with relevant laws and regulations. However, in response to increased global awareness of environmental issues and consumer demand for more sustainable products, their role is undergoing a significant transformation. Product stewardship teams are now shifting their attention from mere compliance towards a more comprehensive focus on product sustainability.
Additionally, regulations are evolving quicker than ever, with broad regulations emerging – primarily from Europe – with recent regulations such as the Corporate Sustainability Due Diligence Directive (CSDDD) and the German Supply Chain Due Diligence Act (SCDDA). With increasing scrutiny and assurance requirements, digital product stewardship platforms provide the necessary foundation for organizational engagement, data management, and process automation.
Emerging EU Regulations
The EU has been introducing new regulations and requirements to ensure that products sold in the EU are safe and comply with environmental and social requirements. As part of the European Green Deal and the EU’s Sustainable Finance strategy, many new regulations, such as the CSRD and the SFDR have been brought forth to ensure environmental and social transparency from companies to external stakeholders, such as customers and investors.
One of the significant regulations is the CSDDD, which requires companies to conduct due diligence on their supply chains to identify and mitigate any risks related to human rights violations and environmental damages. This is significant for European firms as it ensures transparency for environmental and social business practices throughout their value chain and helps them to align their operations with the EU's sustainability goals, making them more competitive in a global market that is increasingly prioritizing environmentally responsible business practices.
This will soon be adopted by EU member states in a similar form as the German SCDDA, which is significant for ensuring compliance procedures for social and environmental targets with potential fines for non-compliance and increasing regulatory and reputational risk.
Along with evolutions in regulations in value chain oversight and reporting, there are also new requirements for product disclosures.
One of the most significant emerging regulations for product stewardship teams is the Ecodesign for Sustainable Products Regulation, which is a proposed feature of the EU Circular Economy Action Plan, which requires companies to create a “Digital Product Passport”. It aims to provide a digital platform where comprehensive information about a product's lifespan, composition, repair and maintenance, origin, and more can be found. This will enable consumers to make more informed purchasing decisions. The new requirements for companies will be to provide this information for their products, promoting transparency and accountability. The passport may also include information on a product’s carbon footprint, durability, and recyclability, thereby encouraging companies to develop more sustainable products.
The European Sustainability Reporting Standards (ESRS) – part of the CSRD – also set forth some new reporting requirements for companies that builds on the EU Circular Economy Action Plan and the Waste Framework Directive to require more transparency from companies on how they avoid the depletion of resources, and manage renewable/sustainable sourcing. The ESRS requires disclosures on the following topics:
- Material Efficiency: Strategies for improving material efficiency, reducing waste, and ensuring the highest possible value is obtained from resources.
- Waste Management: Disclosures of waste management strategies, including plans and targets for waste reduction, recycling and reusing materials, and reducing landfill disposal.
- Product Lifecycle: Information about the lifecycle of products or services, including design, production, use, and end-of-life stages.
- Resource Use: Details on the use and sourcing of raw materials, such as whether these materials are renewable, recycled, or non-renewable.
This means organizations need to have a detailed understanding of how their products contribute to social and economic issues, which creates the need for more detailed data, down to the SKU level.
With these new regulations, product sustainability is becoming a top priority for many organizations. Alongside the demand for more data at the corporate level, external stakeholders such as customers or investors are expecting to see more product-level disclosures with data on environmental and social impacts.
While lifecycle assessments (LCA’s) are the gold standard for product sustainability, they tend to be expensive and difficult to scale. However, more and more customers are beginning to seek out product emissions data in order to manage their scope 3 greenhouse gas emissions. This is creating the need for product stewardship teams to generate more product carbon footprints and other product circularity data.
The Demand for a Digital Solution
Managing product stewardship programs can be challenging, given the multiple regulations and requirements, the need for cross-functional engagement, and the multitude of stakeholder demands for information. Digital solutions can help product stewardship teams manage their programs more efficiently across functional teams in Compliance, EHS, Procurement, Product Engineering, and more. These solutions not only help organizations address global compliance obligations but provide comprehensive support for product sustainability initiatives such as recycled content tracking and reporting as well as product carbon footprinting. In addition to full product composition and information tracking, digital product stewardship platforms streamline and automate supplier engagement and due diligence activities that ultimately flow into product tracking for key compliance, responsible sourcing, and product sustainability initiatives. As organizations prepare for emerging priorities including Scope 3 emissions reporting and the German Supply Chain Due Diligence Act, product stewardship teams will need to effectively engage their upstream and downstream value chains as part of their due diligence strategies, another driver for robust digital solutions to address the expanding data management and reporting challenges.
Product stewardship is a critical aspect of any organization's operations and ability to manufacture and place products on global markets. As regulations and requirements evolve, it becomes increasingly crucial for product stewardship teams to not only comply with the latest regulations but to also deliver on product sustainability commitments. Digital solutions help organizations operationalize and automate key processes critical to their ability to meet the commitments they have made to their employees, stakeholders, and communities where they operate.