This article is part of a series of articles on sustainability in the lifecycle of a product
The beginning of life: product (pre-)development
The EU has the ambition of transitioning to a truly sustainable economy and becoming carbon neutral by 2050. Starting with the publication of the European Green Deal in 2019, the EU is adopting environmental, climate and energy legislation with a wide-ranging scope, which will impact European and international companies’ entire chain of activities, both in terms of risks and opportunities. In a series of articles, Dr2 Consultants will analyze the impact of EU policies on four key areas of companies’ operations: the product (pre-)development, the introduction to market, the end-of-life, and strategy and reporting. In this first part, we will dive into sustainability in product (pre-)development (conception, design, sourcing and production).
Designing sustainable products
One of the key building blocks of the European Green Deal is the Circular Economy Action Plan (CEAP), adopted in March 2020. The CEAP aims at reducing the pressure on natural resources by making sustainable products the norm, reducing waste and developing new low-emissions technologies and services. The key to ensuring circularity of the economy is to have products that are meant to be durable, reusable, repairable and recyclable. To that end, the European Commission presented on 30 March a proposal on the Ecodesign for Sustainable Products Regulation (ESPR), previously called the Sustainable Products Initiative.
The ESPR will be key for delivering on the ambitions of the Green Deal and ensuring that all products put on the EU market are sustainable. The regulation extends the existing Ecodesign Directive, which sets certain design requirements for the sustainability of energy-related products (e.g. washing machines) to all physical goods (except from feed, food and medicines). Under the ESPR, ecodesign requirements will be set for specific product groups to improve their circularity, energy performance and information provided to consumers.
Categories of products will be targeted in several waves, with the first workplan to be defined at the end of the year. The European Commission will open public consultations to determine which categories should first be addressed, but on the long-term, all products are planned to be included in the scope. The Commission has already announced it considers textiles, furniture, mattresses, tires, detergents, paints, lubricants, as well as intermediate products like iron, steel and aluminum to have high environmental impact and strong potential for improvement and may thus be suitable candidates for the first workplan of ESPR.
Sustainability requirements laid out by the ESPR will need to be taken into account in the entire product (pre-)development phase: from the moment the concept of the product is developed, and then during the product’s design phase. Indeed, they include performance requirements for products such as durability, reusability, recyclability and repairability of the product, but will also prohibit use of substances that inhibit circularity as well as set some minimum targets for inclusion of recycled content.
Making companies accountable
The ESPR also plans for the sustainability and environmental footprint of products to be monitored and accounted for in a newly created Digital Product Passport (DPP), which will also include information on the traceability and durability of the product. The DPP will make technical data about the product’s environmental impact and overall sustainability public and easily available to consumers. This will enable businesses and consumers to make informed choices about the products they use, as well as to be more aware of the hazardousness of the chemicals contained in the products, to which the regulation also draws special attention.
Therefore, the sustainability of products needs to be considered in the product (pre-)development phase not only from a regulatory perspective, but also to gain an advantage compared to competitors. Indeed, studies have found that that EU citizens place the environment and climate change among the most important issues their countries and themselves face. As such, the attention paid by consumers to the environmental impact of their purchases is increasing.
Promoting sustainable sourcing and due diligence
The sourcing of materials used to make the product is also increasingly being regulated at EU level, with the aim to drive more sustainability in the second phase of product (pre-)development. First and foremost, the Commission aims at addressing the high environmental impact of imported raw materials associated with deforestation and forest degradation, such as soy, beef, palm oil, wood, cocoa, coffee, but also leather and furniture, through the Deforestation-Free Imports Regulation. The Regulation will introduce mandatory due diligence rules for companies placing such commodities on the EU market, which would need to track geographically the origin of the commodity and be able to show proof that is does not originate from areas subject to deforestation. The European Parliament ambitions to go even further, with Members of European Parliament suggesting to also include raw materials such as rubber, gold and iron, or wooden furniture in the scope.
This comes in the context of a larger ambition from the Commission to increase corporate responsibility over the environmental and social impact of their activities. As such, the Commission proposed to introduce due diligence requirements in the Corporate Sustainability Due Diligence Directive, presented on 23 February 2022. Under the new rules, companies will be required to look for, identify and, where necessary, prevent, end or mitigate adverse impacts of their activities on human rights or the environment, for example pollution and biodiversity loss.
These new due diligence requirements will drive more sustainability in the (pre-)development of a product, as they will apply to companies’ entire supply chains, including procurement and sourcing. Companies will need to ensure that their activities but also their suppliers’ do not have negative social or environmental impacts.
Global trends for responsible production
Internationally the United Nation’s Sustainable Development Goals (SDGs) of 2015, also known as the 2030 Agenda for Sustainable Development, contain a universal call to action to end poverty, protect the planet and ensure that by 2030 all people enjoy peace and prosperity. While the SDGs provide a non-binding framework, nation-states and supra-national organizations, such as the EU, use it as basis for developing binding policies. Conversely, the EU also played a major role in developing the seventeen goals, each of which are integrated in EU policies, recognizing that action in one area will affect outcomes in others and that development must balance social, economic and environmental sustainability.
The goals of “Responsible consumption and production”, “Climate action”, “Industry, innovation and infrastructure” and “Partnerships for goals” create a framework that companies can use as basis to establish long-term, ambitious sustainability strategic goals when it comes sustainable production.
Reducing CO2 emissions in production processes
The production process itself will be impacted by a series of more stringent environmental rules presented in July 2021 as part of the Fit for 55 package, another key building block of the European Green Deal. Companies will have interest in increasing the share of renewable energy in their energy mix as the revision of the Energy Taxation Directive will increase taxation rates on fossil fuels while ensuring an advantageous rate for renewables and low-carbon fuels. For industries falling under the scope of the EU Emission Trading System, reducing their emissions is even more important as the number of carbon allowances delivered yearly within this carbon market are bound to decrease, in turn leading to an increase in carbon price.
Member States will also have to take action to reach their new, increased, emissions reduction targets under the Energy Efficiency Directive, leading to measures that will disfavor energy-intensive practices. This could however also make it easier for companies to reach their sustainability goals as Member States will support making available energy-efficient technologies and solutions and promote the use of renewables. Other opportunities in support of sustainability goals as regards the production process can also be found in the revision of the Renewable Energy Directive, which aims to make providing renewable energy easier for energy operators, and therefore cheaper for consumers.
Companies will therefore have to look at the environmental impact of their production activities to evaluate the extent of the impact of new EU energy and climate legislation. On this basis, companies will need to evaluate whether their activities will need adaptation. However, for companies looking to enhance the sustainability of their production processes, many opportunities will arise from these new legislations.
The new European environmental rules will have strong implications on future products, driving more sustainability in their (pre-)development, from the earliest phases of their conception and production. New legislation is setting a trend for more sustainable design, choice of materials, sourcing as well as for production processes that are environmentally friendly and respectful of human rights.
Next to the design, conception and production of the product, EU legislation is also aiming at making the activities related to introducing a product on the market more sustainable, notably by reducing the environmental impact of logistical activities and of packaging. Dr2 Consultants will analyze this legislation in our next article of the “Sustainability in the lifecycle of a product” series.
Curious about how EU environmental legislation applies to your company’s activities? Dr2 Consultants’ European Green Deal Impact Scan provides you with a comprehensive overview of how EU legislation will affect your business, identifying the opportunities and challenges and highlighting moments to positively influence the policies and legislation or compare the EU policy perspective to your company’s strategic goals. Want to know more? Don’t hesitate to contact us!