Navigating the new Ecodesign Regulation: practical implications for companies

As a cornerstone of the EU's Green Deal and its Circular Economy Action Plan, the new Ecodesign Regulation for Sustainable Products (ESPR) introduces sustainability requirements for almost all kinds of products placed on the EU market, a digital product passport, and new obligations for the handling of unsold products. For affected companies, understanding the nuances of the new rules is essential not only for compliance reasons, but also for capitalising on opportunities to innovate in product design and sustainability practices.

A holistic approach to product sustainability

The Ecodesign Regulation significantly broadens the scope of its predecessor, the Ecodesign Directive, to include a wide array of products beyond just energy-related items. It mandates comprehensive sustainability standards across all stages of a product's life cycle, from design to disposal, emphasizing durability, reparability, and recyclability with the ultimate goal of minimizing environmental impact and promoting a circular economy.

Key features of the ESPR

• Extended product scope: The ESPR has drastically expanded its reach and impact. It now applies to most physical goods placed on the EU market, with only limited exclusions. The exclusions encompass food, feed, (veterinary) medicinal products, living plants, animals and micro-organisms, products of human origin, products of plants and animals relating directly to their future reproduction, and certain types of vehicles as well as products whose sole purpose is to serve defence or national security. The broadened scope includes components and intermediate products, making the ESPR relevant to a vast range of industries.
• Scope of applicability across the supply chain: The ESPR applies to multiple actors in the product lifecycle to ensure that all parties contribute to the overarching goal of sustainability.
  
  The new rules primarily focus on manufacturers, who are responsible for designing and producing goods that comply with the ESPR's requirements, including sustainability and recyclability criteria. Importantly, manufacturers must also undertake a conformity assessment procedure and draw up the required technical documentation before placing a product subject to ecodesign requirements on the market or putting it into service. Furthermore, they are required to obtain a declaration of conformity.
  
  Responsibility for compliance is also transferred to the downstream stages of the supply chain. For instance, importers must ensure that the products they bring into the EU comply with the new regulations. Distributors and retailers are also required to verify the compliance of the products they sell, including proper labelling and adherence to the sustainability standards set forth by the ESPR.
• Specific product requirements: Under the new ESPR, products must be designed with a view to their entire lifecycle. This includes enhancing their durability, the ability to upgrade and repair them, and improving resource efficiency and recyclability. 
  
  However, the ESPR itself does not set up any specific requirements. Rather, the EU Commission will adopt delegated acts that establish ecodesign requirements for specific product groups within the general framework of the ESPR. As a first step, the Commission shall develop a working plan that sets out priority product groups for ecodesign requirements and estimated timelines for adoption. In its first working plan that has to be adopted by 19 April 2025, the Commission is mandated to prioritise certain product groups (including iron, steel, aluminium, textiles, furniture, tyres, detergents, paints, lubricants and chemicals).
• Digital product passport: One of the ESPR's flagship features is the introduction of the digital product passport (DPP) which will be mandatory for all products regulated under the ESPR. This digital tool will store detailed and up-to-date information about each product's environmental attributes, including its manufacturing process, materials used, energy efficiency, and disposal guidelines to boost transparency and enable consumers to make more informed purchasing decisions based on sustainability credentials. The individual DPP requirements will be laid down in the delegated acts relating to individual products or product groups mentioned above, but the ESPR establishes a general framework for these delegated acts. Further secondary legislation will address organisational aspects relating to DPPs.
• Rules relating to the destruction of unsold goods: Following intense discussion during the legislative process, the ESPR primarily requires economic operators that discard unsold consumer products directly or have unsold consumer products discarded on their behalf to disclose certain information relating to the destruction (e.g., on the weight and number of the discarded products).
  
  However, in a significant move to reduce waste, the destruction of certain unsold consumer products is generally prohibited to compel companies to rethink their overproduction and waste management strategies. From 19 July 2026, this ban applies to apparel and clothing accessories as well as footwear, but the Commission is entitled to add other products over time. The Commission shall also lay down exceptions from the prohibition in secondary legislation (e.g., in case of health and safety reasons).
  
  Generally, micro and small enterprises are exempted from these rules and medium-sized enterprises will only be in scope from 19 July 2030.
• Sanctions for non-compliance: Non-compliance with the ESPR carries significant risks. Member States are required to establish and enforce appropriate sanctions, including administrative fines and exclusion from public procurement. Further sanctions may include mandatory product recalls or even criminal charges depending on the severity of the infringement. In addition, the ESPR empowers consumers and, under the Collective Redress Directive, certain associations to initiate civil claims against manufacturers who fail to comply with the stipulated requirements or, subsidiarily, further actors along the supply chain such as the importer. Particularly in case of collective actions, this could lead to additional financial liabilities and damage to the company's reputation, underscoring the importance of strict adherence to the ESPR's standards.

Practical implications

The ESPR will officially enter into force on 18 July 2024, but companies will have some time to adjust their operations due to the necessity of secondary legislation as well as transition periods. 

However, even if the first new ecodesign requirements will only come into effect in a few years, affected companies and, in particular, those active in priority sectors should already familiarise themselves with the new provisions to ensure compliance and avoid sanctions. They will need to adapt their product designs and production cycles to comply with these stringent new rules. This includes investing in research and development to enhance product longevity and repairability. They may also have to take strategic decisions on some product lines (potentially including the discontinuance of certain products). Companies across the EU and international firms active in the EU must also prepare for the implementation of the DPP by integrating necessary data tracking and reporting systems. Compliance with these regulations will require robust supply chain management and, possibly, a shift towards more sustainable sourcing and production methods. 

On the other hand, the new regulation also presents significant opportunities for innovation in sustainable product design, potentially opening new markets and consumer segments that prioritise eco-friendly products. While the transition may pose challenges due to the potential high costs of compliance and technological upgrades needed, early adopters that navigate these changes efficiently may gain a competitive edge in an increasingly eco-conscious market.

Preparing for the future

The ESPR is set to reshape a lot of EU product markets, pushing companies towards more sustainable practices. Business models that rely on the short lifespan of products will no longer be feasible. 

Companies engaged in relevant business in the EU should commence comprehensive audits of their current products and processes to identify necessary modifications. Engaging with stakeholders, including suppliers and customers, will be crucial in adapting supply chain practices to meet the new requirements. Additionally, investing in sustainability and compliance training for staff and business partners will be key for successfully navigating the transition. By fully understanding and integrating the ESPR's requirements, businesses can not only ensure compliance but also position themselves as leaders in the sustainable transformation of the industry.