New European product policy requires increased focus on traceability

Being able to trace the content of products and how they have been manufactured is becoming increasingly important. We must live more resource-efficiently and greatly reduce greenhouse gas emissions and therefore need to use renewable raw materials and energy sources as well as reused materials as far as possible. Business customers, end consumers and legislators alike are increasingly interested in, and dependent on, access to reliable information about these conditions. The need for traceability in value chains also arises to ensure that the goods we use have been produced in a responsible manner.

However, reliable traceability is difficult. Product value chains are often global, product content subject to trade secrets and data often difficult to access. However, the digital transition offers completely new opportunities. In the linked green and digital transformation ("twin transition"), which is an overall ambition of the current EU Commission under Ursula von der Leyen, a new European product policy is now being formed in which traceability is given a central role. Sweden has good conditions to be a constructive force in this conversion work and to turn challenging traceability requirements into a Swedish competitive advantage. However, we need to raise the ambition in the European cooperation that is a prerequisite for this and at the same time ensure that even smaller companies are given the conditions to operate in this new business landscape.

Digitalisation and climate change in tandem

The linked transition ("twin transition") is the consequence of an increasing and society-wide digitalisation, in combination with increasingly stronger measures to slow down global climate change. This is clearly reflected in the EU Commission 's policy agenda, where the first two objectives are a green growth policy ("A European Green Deal") and an extensive effort on digitalisation ("A Europe fit for the Digital Age”). One of several areas of reform is a new European product policy, with an emphasis on traceability in value chains The possibilities of digitization permeate the proposals.

An important part in that context are so-called European data spaces (" European data spaces"), which must make the required data available. Another important part is digital product passports to make the information manageable for the user of the data. In this area, policy development has been rapid during the first half of 2022. To ensure that data is sharable across the EU, a number of the legislative proposals come in the form of regulations which, unlike directives, are introduced verbatim into the legislation of the member states. It is clear that data flows' need for cross-border and large-scale solutions is speeding up European integration.

A very important first step is the new battery regulation that the EU's Council of Ministers agreed on in March 2022. In order to be marketed in the future, batteries for electric vehicles must be provided with digital product passports that report, among other things, material content. A legal space for the corresponding eligibility requirements for a significantly larger range of products will be created through the regulation for ecodesign for sustainable products that the European Commission proposed on March 30, 2022. The need for traceability in value chains also arises through the European Commission's proposal for a directive for appropriate corporate due diligence from February this year. Traceability is not only about what the products contain, but also about how they were manufactured.

Much data that carries important information for this traceability already exists in various parts of the value chains. However, for various reasons, they are not available and sharable between the companies and other users who need them. This lack is similar in many other areas of society where increased data access is expected to somehow contribute to better functioning, for example in research, care and transport. Sharing and making data available is therefore an important focus area in the European policy process. The data areas ("data spaces") that are established to speed up the availability of data are a new phenomenon in society's digital infrastructure.

Within the framework of these initiatives, data definitions, access to a secure IT environment, making data available and regulation of user access to data are handled, per application area. Much is still uncertain about these European data areas, for example the relationship between private and public interests is not obvious. However, several important development initiatives have been taken, above all in connection with the needs of the European manufacturing industry, for example The International Data Spaces Association and Gaia-X. The EU Commission is now following up with funding under Digital Europe Programme (DIGITAL) to gather experience from the existing initiatives and develop networks, standards and capabilities. Such European data areas will become important prerequisites for policy reforms in several areas.

A new business landscape for Sweden to deal with

Sweden has good conditions to be a constructive force in this transition and let the new conditions become a Swedish competitive advantage. Several important development initiatives have already been implemented, for example to develop traceability and labeling for specific material or product types. In several cases, these are financed by Vinnova. Individuals and organizations in Sweden also have a comparatively high digital maturity. In a few years, when the consultations for ecodesign requirements for selected product groups begin in the EU, important prerequisites will therefore be in place. Much indicates, however, that Swedish actors had a wait-and-see attitude towards the data area initiatives taken in Europe.

Our ability to act in these contexts should therefore be developed. Here we differ from, for example, Finland and Germany, where the attitude has been significantly more proactive. This also seems to apply to the fairly close needs that come from the new battery regulation. Here it is clear that not least Germany has a head start in the development of formats for digital product passports for vehicle batteries.

Sweden therefore needs to take important steps to contribute to the strengthened sustainability that is the ultimate goal of the traceability policy and to secure its place in the new R&D and business landscape that is emerging in its wake. Overall, a clearer and more unified national leadership is needed, for example within the framework of Gathering Power for a sustainable digitized Sweden, system demonstrators and the second generation strategic innovation program (" Impact innovation")) which is currently being developed.

These programme should stimulate collaboration along value chains in the development of digital product passports and data areas. Through international networking, those involved should ensure that this happens in harmony with developments in above all the rest of Europe, including EU-joint initiatives for broader international harmonisation. This will also contribute to strengthening the parts of the value chains that have not yet developed their capabilities in the area. All in all, better conditions can then be created to participate in future consultations regarding product-specific ecodesign requirements.

Broad cooperation between authorities is important to be able to manage connections between policy areas, for example between product policy, the national digital infrastructure and skills development for small and medium-sized enterprises (SMEs). Within Impact Innovation, for example, the three program financiers will not be enough to solve the challenges that are in focus here. It is clear that the new requirements will be challenging for many SMEs. Many of these companies are vital components of the Swedish industrial ecosystem. With the limited resources they often have, they will have to defend their positions under partly new conditions. Support for these should therefore be prepared now.

With regard to the European data areas, it is also important that the Swedish equivalent, the Swedish basic data domains, is given a clear connection to what is now being started at the European level. It is positive to see that several Swedish actors have done well in DIGITAL's very first round of calls over the turn of the year 2021-22. However, much more will be needed. In order to secure strong and sustainable Swedish participation within DIGITAL, funds for targeted pilot projects, as well as for co-financing of future DIGITAL-financed projects project, should be made available. This was recently suggested by Vinnova in the final report on the government assignment(see the final report in PDF below) on mapping the need for development efforts for data sharing.

The direction is clear. Traceability along global value chains is becoming increasingly important and improved opportunities for cross-border data sharing create completely new conditions. Along the way, European integration is strengthened, which calls for a stronger Swedish EU commitment, not least around data sharing. At the same time, Sweden's future competitiveness is determined, among other things, by the fact that small and medium-sized companies, often subcontractors in the manufacturing industry, are given good conditions to act in this new business landscape.

This policy brief is based on a report (see the report in PDF below) produced within a joint authority network for strategic analysis linked to Power collection for a sustainable digitized Sweden.

Sources

Slutrapport Kartlägga need for development efforts for data sharingThe interconnected transition