Today’s manufacturers need to start assessing the environmental impact of their productions in China (or elsewhere), because of the impending EU Ecodesign for Sustainable Products Regulation (ESPR) coming in May 2023 that will demand that products become more sustainable and that supply chains are transparent for market surveillance. Simply put, you need to comply with this regulation or you will not be able to sell your products in the EU at all…and complying may mean redesigning existing products and sourcing new suppliers for many manufacturers. So, the clock is ticking…
If you sell into the EU now, read on urgently! And if you sell into other developed markets, such as Canada, the USA, the UK, etc, don’t think that it doesn’t also apply to you as similar legislation is coming in your markets, too.
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The sustainability trend is embodied by the Ecodesign for Sustainable Products Regulation for putting products on the EU market. What is it?
The Ecodesign act fits into the EU’s overarching circularity plan. It’s a regulation that will force companies who sell products in the EU to gather a lot of data about them, take some actions to make them more sustainable, and affix a product passport label on all of them so market surveillance authorities can check their information. This will improve product sustainability which is good for the planet but also helps customers make smarter buying decisions. Importantly, the information on the product also needs to cover how it was made, its impact during use, and what happens to it at the end of its life. Also, your CE status is tied to this. (03:20)
Does product design for sustainability play a role?
Increasingly, yes. The company designing the new product can focus on sustainability, selecting materials that can be recycled for example, or making the product easy to disassemble (which can aid in its repair or recycling at the end of its life). Soon if a product is ‘disposable’ and not sustainable it’s more likely to be rejected for sale in the EU due to ESPR – an example of this is Fast Fashion which we’ll come on to later. (07:37)
Are any product categories in the crosshairs of the EU first?
Initially, apparel was due to be policed most strictly and early as it is a large user of fossil fuels, but now lithium-ion batteries are also being seen as equally urgent to tackle, with construction materials closely behind. Consumer electronics will be regulated early on from Mid 2023, but the EU commission is already planning up to 30 new ecodesign and green manufacturing regulations for specific materials and product types, such as certain textiles or construction materials, to come into action by 2030. If a product requires a CE certificate now, it’s going to need to comply with the ESPR because they are linked and the manufacturer will need to prove compliance with ESPR to the notified bodies in order to gain the CE mark in the near future.
The earlier EU MDR which was a much tougher regulation for medical devices heralded the coming of the ESPR which is similarly tough, but now for a LOT more product types. The market was not ready for the EU MDR and manufacturers and notified bodies both appealed to the EU commission for more time, but they refused and gave them an ultimatum: comply or don’t sell the medical devices into the EU market. So, with this in mind, expect similar treatment surrounding the need for increased sustainability of products and the ability for manufacturers to prove it.
It becomes law on the 21st of May 2023 and there is a grandfather period until May 21st 2024 – so from that day products sold in the EU must be fully compliant. (09:00)
What are Chinese manufacturers doing about this sustainability requirement? Do they even know or care about it?
Their knowledge and concern about this are little and some mistakenly believe that before it becomes law there may be some inter-government discussion to somehow water it down. However, this drive to become more sustainable and protect the environment is bigger than just wrangling over what might aid business. By purging cheap and unsustainable products from the market, the EU is taking a serious stand in favor of the environment. (18:00)
Lithium-ion batteries: A growing environmental issue.
74% of lithium is used in batteries. 14% used in ceramics and glass. 3% in lubricants. Global demand is $4.6 billion per year and is expected to grow to $22.8 billion by 2030, largely driven by the growth in EVs. Battery recycling, especially from EVs will become an ever larger problem, and a recycling tax may well be levied on automakers who do not recycle their own batteries because the total global recycling of Li-ion batteries is between just 1 and 3% globally right now. This is too low and ecologically a disaster because lithium batteries dumped in landfill explode and burn fiercely as well as releasing hydrochloric acid into the ground. With hundreds of billions of tons of lithium used per year, the scale of the problem is vast.
As well as a recycling tax, reuse through leasing and renting may be a solution with EV batteries because an eco-design business model would be that consumers buy the vehicle, but lease the battery from the manufacturer who will service and recycle it, reducing the risk of older batteries being dumped by consumers. The money brought in by both can go towards funding the (expensive) Li-ion battery recycling which is currently too expensive for manufacturers to embrace willingly in most cases.
EVs are in the firing line first, but consumer electronics won’t be far behind due to their wide usage of Li-ion batteries. (19:35)
Are other governments also demanding more sustainable products?
Yes, they are, so even if you don’t sell in the EU, THIS KIND OF REGULATION DOES AFFECT YOU. The UK, Canada, Australia, and some states in the USA are putting similar regulations in place now. After the COP27 meeting in November ’22 there may be even more changes and countries taking notice of this. (28:02)
How do companies usually assess the environmental impact of their products, including extraction and manufacturing?
They do a lifecycle assessment for the products. Complying with ESPR includes your supply chain information, so the assessment needs to start with every component that goes into your product and starts with the extraction of raw materials, processing, etc. For complex products, this lifecycle analysis covering all of its elements, their origins, and their environmental impacts will be very detailed and difficult to create. (30:19)
Example: What a mobile phone lifecycle may include, and how ecodesign might affect how it’s designed and developed.
How much energy does it consume, can it be prepared easily if broken, can the battery be changed easily, how long does the battery last, afterwards can the manufacturer take the phone back for recycling?
Phones must be designed to make the battery last longer, even down to software that is designed to be less energy hungry. A future ecodesign design trend would be a return to batteries in smartphones, for example, that can be swapped out by the user and also a modular approach where phones can be repaired more easily.
Ecodesign demands that manufacturers design IN recyclability and circularity. Designing for reliability and durability to increase its lifespan before it breaks down is also important, as well as repairability. (33:12)
How will ‘Fast Fashion’ be affected?
Fast fashion is more disposable clothing with pieces that are designed to be worn just a few times, look bad after several washes, are produced very quickly in small factories with scant regard for the environment, and are often shipped by air to be delivered to customers quickly. Understandably, this is at the top of the list of products to tackle in the EU and is likely to be taxed so heavily that the fast fashion industry as it is today will no longer be able to exist in the same form.
Apparel is a problematic product niche because it is no longer easily recycled. Natural materials are recyclable, but a huge amount of apparel today is made from oil with plastics like polyester used widely even though it is not easily recycled, requires a lot of dye to color which is bad for the environment, and then over time releases a lot of microplastics into the water, too. (39:45)
What can businesses do to become compliant?
A lifecycle assessment is a must. There are tools to help you do this and ISO standards outlining the principles and requirements for the assessment (ISO 14040 and 14044). You will need your manufacturers to cooperate with you and provide a lot of data about energy, materials, etc, used, but Chinese suppliers, in particular, are likely to be reluctant to help and provide information or may try to find ways to ‘get around’ the requirement to provide real information which thereby renders the assessment useless.
You need to arrange in advance when working with a foreign supplier for them to be obliged to give you transparent supply chain information because you will need to show transparency down to tier 3 suppliers in your supply chain to be compliant, and it is already sometimes difficult to get the identity of tier 1 sub-suppliers (these would be for items like batteries, displays, etc), and certainly for the sub-sub-suppliers who serve them with raw materials for creating displays, etc. Trying to get this information retrospectively, especially from Chinese suppliers, may be almost impossible in some cases as they treat their supply chain information as a business secret (perhaps partly in fear that customers will go direct and try to undercut them). Even if your supplier, say a contract manufacturer, agrees to assist you, if they approach a battery manufacturer who is likely to be a very large corporation it may be that they are ignored…this leaves you high and dry, so planning ahead and starting to find suppliers who are all willing and able to assist you is required now. (42:30)
Your new commercial decision will not only be about a supplier’s costs but also if they assist you to comply with the new Ecodesign regulation.
When developing a new product it will be wise to drop suppliers who cannot or will not provide the correct information. You may also choose to do some sourcing yourself so you have a relationship with the highest-risk suppliers and you know that they’re sure of the regulations and data needed, rather than wholly relying on your foreign assembly supplier to gather it, for example. (50:51)
The product passport.
We’re in the early days of this transition right now (late 2022). but by 2030 all products will need a passport to enter the EU. The product passport will likely include the following information, although the full details haven’t been confirmed by the EU commission yet:
- Energy used to manufacture the product
- Emissions and harmful toxins produced during manufacturing
- The recommended disposal method for the product (53:04)
Advice for you if you’re selling into the EU right now.
Look at your products. Engage a compliance officer. Ask questions of your design department about if they have considered the need for further sustainability in the products.
Consumers will be made aware due to the product passport whether products have been designed and manufactured in an environmentally-conscious way, so older pre-ESPR product types may be unappealing to them which could affect sales. There may also be a tax on less sustainable products (and certain types may need to include up to 80% recyclable materials and components which could require a lot of redesigns in a short period of time for you).
You cannot bury your head in the sand. You need to take action to handle this right now if you sell into Europe, but also in all of the developed countries and, to a lesser extent, in South America, too.
Ultimately, this regulation is good news for the planet, but it’s bad news for importers who have yet to get started on working to become compliant with it. (53:04)
P.S. Related content to ESPR you may also like…
- What is the EU Ecodesign for Sustainable Products Regulation?
- The EU Ecodesign Regulation Is Coming, But Are You Prepared? [Podcast part1]
- How To Comply With The EU Ecodesign Regulation? [Podcast part 2]
- If this episode has scared you and you feel you need help to take control and protect your business from being blocked from selling your products into the EU, Sofeast can help you. Take a look at this solution that we offer and speak to us about your project: EU Ecodesign Regulation Risk Assessment & Preparation