WILL EU’s DIGITAL RULES USHER INDIA’S GREEN BREAKOUT?

WILL EU’s DIGITAL RULES USHER INDIA’S GREEN BREAKOUT?

Why in the News?

• The European Union (EU) is introducing the Digital Product Passport (DPP) as part of its EU Green Deal and sustainable product policies.
• This move is aimed at enhancing product transparency, traceability, and circularity across global supply chains.
• The Digital Product Passport mandate will impact Indian exporters, especially in sectors like textiles, electronics, batteries, and packaging.
• For India, this development presents both a challenge and an opportunity to align with global sustainability and digital compliance norms.

Historical Parallels

Japan in the 1970s:

• Initially a minor player in the U.S. auto market dominated by gas-guzzling vehicles.
• The oil crisis spiked fuel prices, shifting consumer demand toward fuel-efficient cars.
• Japanese automakers responded with smaller, smarter vehicles—transforming a crisis into a breakout moment.

South Korea in the 1990s:

• Hit hard by the Asian Financial Crisis.
• Responded with tech-focused reforms and heavy investment in digital infrastructure.
• Evolved from a manufacturing follower into a global tech leader.

India’s UPI Revolution:

• UPI went beyond digitising finance—it created a platform for scalable, inclusive innovation.
• Showcased India’s ability to leverage infrastructure for digital transformation.

India Today – A Similar Turning Point:

• The EU’s Digital Product Passport (DPP) mandate poses both risk and opportunity.
• With the right strategy, India can transform this regulatory disruption into a launchpad for global leadership in sustainable, digital trade.

EU’s Green Trade Disruption

• The European Union’s Circular Economy Action Plan (CEAP) is reshaping global trade norms through sustainability-focused regulations.
• Under the Ecodesign for Sustainable Products Regulation (ESPR), the EU will mandate Digital Product Passports (DPPs) for a wide range of products.
• DPPs meaning: Digitally accessible records (often via QR codes) that provide detailed data on:

○ Product origin and composition ○ Environmental impact and carbon footprint ○ Reparability ○ End-of-life handling and recyclability

Expected Benefits:

• Greater consumer trust and informed purchasing ● Better supply chain transparency and efficiency ● Support for the circular economy model ● Reduced overall environmental footprint ● Enhanced recyclability of products

Phased Rollout:

• Initial focus on batteries, textiles, and electronics
• Expansion planned to include chemicals, metals, furniture, tyres, and more

Global Implications:

• All products entering the EU must comply with Digital Product Passport requirements, regardless of country of manufacture
• This represents a critical compliance challenge—and opportunity—for exporters worldwide, including India.

Why It Matters for India

• Major Export Destination: The EU is India’s largest export market, contributing over 21% of merchandise exports, worth more than $98 billion in FY25.
• High Exposure Sectors: Digital Product Passport targets sectors where India is globally competitive, including:

○ Textiles ○ Iron and steel ○ Aluminium ○ Chemicals ○ Footwear and leather products

• These industries form a significant share of India’s export basket to the EU.
• Immediate Compliance Challenges: Two sectors face early deadlines:

○ Batteries by 2027 (India’s FY24 exports ≈ $90 million) ○ Textiles by 2028 (India’s FY24 exports ≈ $10 billion)

• Non-compliance may lead to market exclusion from one of the world’s most eco-conscious regions.
• Export Competitiveness: Early Digital Product Passport alignment ensures continued market access and enhances India’s image as a responsible trade partner.
• Supply Chain Digitisation: DPP mandates machine-readable data across supply chains.

○ This will accelerate digitisation, traceability, and efficiency, particularly in textiles and electronics.

• Circular Economy Integration: Encourages sustainability in design, production, and end-of-life handling.

○ Supports India’s EPR policies, aligns with climate goals, and promotes circular manufacturing, enhancing overall sustainability across industries.

• Smart Regulation & Enforcement: Digital traceability enables real-time, remote enforcement.

○ Agencies like BIS and CPCB can verify standards digitally, enhancing transparency and credibility.

• Green Tech Leadership: Early adoption positions India as a leader in sustainable digital trade among emerging economies.

○ Offers a pathway to future-proof industries through green innovation.

Infrastructure Imperative

• MSMEs at the Core: While large firms may adapt to Digital Product Passport mandates, MSMEs dominate India’s exports and face significant challenges in compliance due to cost, capability, and connectivity gaps.

○ Without inclusive support, these enterprises risk exclusion from global sustainable trade.

• Need for a Digital Public Infrastructure (DPI): A government-backed DPI for Digital Product Passport is essential—modeled on India’s UPI success.
• The DPI should provide:

○ Standardised data templates ○ Secure APIs and consent-based access ○ Authentication mechanisms ○ Integration toolkits for ERP systems ○ Centralised product registries

• Such a backbone would democratise compliance, making it possible for manufacturers of all sizes to meet EU standards and enhance sustainability practices.
• Private Sector Innovation is Rising: Early platforms are emerging—but they are likely to serve large, formal-sector firms first.

○ A DPI would bridge this digital divide, ensuring MSME inclusion in the green trade transition.

• Pilot Projects to Build Momentum:

○ India can kickstart the DPI rollout with pilots in key export sectors targeted by the EU Digital Product Passport:

■ Textiles – Tirupur (implementing solutions like FibreTrace for transparency in garments) ■ Electronics – Noida ■ Chemicals – Vapi ■ Iron and Steel – Jamshedpur

○ Pilots should involve:

■ Select exporters ■ Regulatory bodies ■ Technology providers

• Outcomes and Impact:

○ These pilots would test interoperability, data collection, and ERP integration. ○ Insights gained will inform national policy, refine technical protocols, and simplify MSME onboarding to the Digital Product Passport ecosystem. ○ Implementation of digital twins for product lifecycle tracking and blockchain platforms for secure data sharing, enhancing sustainability throughout the supply chain.

Coordinated Action

• Inter-Ministerial Collaboration is Key:

○ India’s Digital Product Passport strategy must involve seamless coordination between core Ministries:

■ Ministry of Commerce ■ Ministry of MSME ■ Ministry of Environment ■ Ministry of Electronics & IT ■ Ministry of Textiles

• Formation of a High-Level Task Force to:

○ Develop sector-specific Digital Product Passport roadmaps ○ Facilitate public-private platform development ○ Coordinate with industry bodies like CII, FICCI, EEPC ○ Mobilise state export councils for grassroots-level outreach

• Institutional Involvement for Capacity Building: Institutions like the Quality Council of India (QCI) must lead efforts in:

○ Setting technical standards ○ Enabling capacity building across supply chains ○ Ensuring quality and compliance preparedness at every level ○ Implementing digital traceability solutions to enhance sustainability across industries

• India’s Green Leap Moment:

○ Like Japan (1970s) and South Korea (1990s), India now stands at a pivotal moment of external pressure and internal possibility.

○ This is an opportunity to build inclusive, scalable digital infrastructure for sustainable global trade.

• Laying the Digital Rails:

○ Investing now in a robust Digital Product Passport infrastructure will:

○ Empower Indian manufacturers to compete and lead in the global green economy ○ Establish India as a standard-setter, not just a follower

• India as a Global Architect of Sustainability:

○ By embracing the Digital Product Passport revolution early, India can:

○ Shape replicable digital sustainability tools for the world ○ Position itself as a global architect of green trade ○ Turn a regulatory challenge into a gateway for leadership, aligned with the vision of Viksit Bharat @100.

The EU’s Digital Product Passport initiative presents a unique opportunity for India to lead in sustainable and digital global trade. By leveraging blockchain platforms and digital twins, India can ensure end-to-end traceability and transparency in its supply chains, particularly in the Indian apparel industry. This aligns with the EU Strategy for Sustainable Textiles and enhances consumer confidence through detailed product data on material composition, carbon footprint, and recyclability.

Implementing Digital Product Passports will require standardised protocols and digital traceability solutions like SGS SMART Source. This shift emphasizes brands’ responsibility in ensuring sustainability attributes throughout the product lifecycle, from raw material sourcing to end-of-life management. By embracing these changes, India can position itself as a climate-neutral leader, driving innovation in preferred materials and circular economy practices.

The Digital Product Passport represents more than just a compliance requirement; it’s a catalyst for transforming India’s approach to foreign trade, aligning perfectly with the Digital India initiative. By developing robust digital infrastructure and fostering innovation in sustainability practices, India can turn this challenge into a significant opportunity for growth and global leadership in the green economy, bridging digital India and foreign trade objectives.

Source: The Hindu Businessline

Mains Question (250 words):

Discuss the implications of the EU’s Digital Product Passport (DPP) mandate on India’s export competitiveness. How can India leverage this shift to lead in sustainable and digital global trade?