The Regulatory Catalyst: ESPR and the DPP Mandate

The European Union’s Ecodesign for Sustainable Products Regulation (ESPR), which entered into force in July 2024 with obligation dates rolling through 2030, represents the most ambitious regulatory attempt in history to embed lifecycle sustainability information directly into the physical products sold within the EU single market. [1]

At its core, the ESPR mandates the creation of Digital Product Passports (DPPs) — comprehensive, machine-readable digital records that accompany each individual product unit, documenting its material composition, manufacturing origin, carbon footprint, repairability score, recycled content percentage, and end-of-life disposal instructions. [2] Unlike existing product labeling requirements, which provide static, categorical information, DPPs are designed to be dynamic, updatable digital twins that accumulate data across the entire product lifecycle from raw material extraction through manufacturing, distribution, use, and eventual recycling or disposal.

The regulation targets more than 30 product categories for phased DPP implementation, but the first and most consequential deadline belongs to EV batteries and industrial batteries: full DPP compliance is mandated by February 2027 under the complementary EU Battery Regulation. [1] Every battery placed on the EU market after this date must carry a scannable QR code linked to a comprehensive digital passport containing detailed information about its chemical composition, manufacturing conditions, capacity degradation metrics, and recycling protocols.

Why Blockchain? The Trust and Tamper-Proof Imperative

The technical challenge of the DPP framework is not simply data collection — enterprises already gather vast quantities of supply chain data. The fundamental problem is trust. A Digital Product Passport is only credible if every stakeholder in the supply chain — miners, refiners, component manufacturers, assemblers, logistics providers, retailers, consumers, recyclers, and regulatory auditors — can independently verify that the data in the passport has not been altered, fabricated, or selectively omitted at any stage. [4]

Traditional centralized databases, where a single entity controls and maintains the records, inherently fail this trust requirement. A manufacturer could modify supply chain records to conceal the use of conflict minerals, overstate recycled content percentages, or underreport the carbon footprint of a production process — and no downstream party would have a reliable, cryptographic mechanism to detect the alteration. [4]

Distributed ledger technology (DLT) — the technical umbrella covering blockchain and DAG-based networks — resolves this trust deficit through immutable, cryptographically secured, decentralized data storage. Once a data point is recorded on a properly designed DLT system, it becomes effectively tamper-proof: modifying a historical record would require simultaneously compromising a majority of the distributed network’s consensus participants, a computationally infeasible attack against any well-designed system. [4]

Decentralized Identity: DIDs and Verifiable Credentials

At the architectural core of blockchain-enabled DPPs are two critical W3C standards: Decentralized Identifiers (DIDs) and Verifiable Credentials (VCs). [4] These standards provide the identity infrastructure that makes trustworthy, cross-organizational data sharing possible without requiring a single centralized authority to vouch for every participant.

A Decentralized Identifier (DID) is a globally unique, cryptographically verifiable identifier that can be assigned to any entity — a battery cell, a manufacturing facility, a mining company, or a regulatory body. Unlike traditional identifiers (such as URLs or serial numbers), a DID is not controlled by any single organization. [4] Instead, its ownership is proven cryptographically through public/private key pairs anchored on a distributed ledger. This means that when a lithium miner issues a DID-authenticated claim about the provenance of their raw material, the claimed identity can be verified by any downstream party without relying on the integrity of a single corporate database.

Verifiable Credentials (VCs) build on DIDs to create signed, cryptographically tamper-evident attestations. [4] For example, an accredited testing laboratory can issue a VC certifying that a specific battery cell (identified by its DID) achieved a particular energy density or passed a safety test. Any party that received this VC — the battery assembler, a regulatory inspector, or a recycling facility years later — can verify the credential’s authenticity and the issuer’s identity without contacting the original laboratory. The cryptographic signature is self-verifying.

Spherity, a German blockchain identity company, has emerged as a leading implementer of DID/VC infrastructure for regulated supply chains. [5] Originally developed for pharmaceutical supply chain compliance under the U.S. Drug Supply Chain Security Act (DSCSA), Spherity’s cloud-based identity wallet infrastructure is being adapted for EU DPP requirements. Their system enables each participant in a supply chain to maintain a sovereign digital identity and issue VCs about their products and processes without surrendering data custody to a central platform.

IOTA: Feeless DAG-Based Product Identity

The IOTA Foundation has positioned its Directed Acyclic Graph (DAG) protocol, known as the Tangle, as a technically superior alternative to traditional blockchain architectures for high-volume DPP data anchoring. [7] Unlike conventional blockchains where transactions must wait for block confirmation and incur per-transaction fees (gas costs in Ethereum, for example), the IOTA Tangle enables feeless data transactions that are confirmed asynchronously through a mesh of cross-referencing validations.

This feeless architecture is critical for DPP scale. A single EV battery pack can contain thousands of individual cells, each sourced from different suppliers, each requiring independent DPP data entries across dozens of lifecycle events. [7] At industrial scale — millions of batteries annually — the aggregate transaction volume for DPP data anchoring would generate prohibitive costs on fee-bearing blockchain networks, but incurs zero incremental cost on IOTA. The energy efficiency of the DAG protocol also aligns with the sustainability objectives of the ESPR itself — it would be paradoxical to build a green compliance system on an energy-intensive proof-of-work blockchain.

IOTA has piloted DPP implementations in collaboration with the European Commission’s blockchain initiatives and multiple industrial partners, demonstrating the ability to anchor product identity data, lifecycle event logs, and sustainability credentials at volumes compatible with automotive manufacturing throughput. [7]

The Battery Pass Consortium: Setting the Reference Standard

The Battery Pass consortium, funded by the German Federal Ministry for Economic Affairs and Climate Action, represents the most advanced DPP reference implementation for the February 2027 battery passport deadline. [6] Led by a coalition of major industry players including BMW Group, BASF, Umicore, and Fraunhofer research institutes, the consortium has published detailed technical specifications for the battery passport data model, including 90+ mandatory data fields covering:

• Material composition: Detailed bill of materials with recycled content percentages and responsible sourcing certifications [6]
• Carbon footprint: Cradle-to-gate greenhouse gas emissions per kWh of battery capacity [6]
• Performance metrics: Initial capacity, cycle life projections, and real-time state-of-health data [6]
• Due diligence: Supply chain human rights and environmental due diligence documentation [6]
• End-of-life: Dismantling instructions, recycling efficiency targets, and second-life application ratings [6]

The Battery Pass technical framework explicitly supports DLT-anchored data verification and DID-based participant identity, providing a neutral interoperability layer that allows different blockchain providers (IOTA, Spherity, nChain, and others) to contribute data to a common, auditable passport structure. [6]

Global Trade Implications and Market Access

The DPP mandate functions as a profound non-tariff trade mechanism with global reach. Any battery manufacturer worldwide — whether based in China, South Korea, the United States, or Japan — that wishes to sell batteries within the EU single market (representing approximately 450 million consumers and a collective GDP exceeding €14.5 trillion) must comply with the battery passport requirements. [3]

This extraterritorial compliance requirement is forcing non-EU manufacturers to invest in DPP-compatible data infrastructure regardless of whether their home jurisdictions impose similar requirements. [3] Chinese battery manufacturers — including CATL, BYD, and EVE Energy — are actively integrating DPP compliance capabilities into their production management systems, recognizing that failure to provide compliant digital passports would effectively exclude their products from Europe’s EV market.

Furthermore, the EU’s regulatory model is generating policy diffusion effects in other jurisdictions. The United States Department of Energy has initiated exploratory work on battery sustainability data standards, while Japan’s battery industry consortium has published interoperability recommendations aligned with Battery Pass specifications. [3] The DPP framework may emerge as a de facto global standard through the sheer gravitational pull of EU market access requirements — a pattern known in trade policy as the “Brussels Effect.”

Competitive Data Sharing: Balancing Transparency and Trade Secrets

One of the most technically challenging aspects of the DPP framework is reconciling the regulatory demand for supply chain transparency with legitimate industrial confidentiality. Battery chemistry formulations, electrode manufacturing processes, and electrolyte compositions represent billions of dollars in proprietary R&D investment. [5]

Circularise, a Netherlands-based blockchain platform focused on plastics and chemical supply chains, has developed a “smart questioning” protocol that addresses this tension. [5] Rather than requiring manufacturers to share raw proprietary data, the system enables downstream parties and regulators to ask binary, verifiable questions (“Does this battery contain more than 16% recycled cobalt?”) that the blockchain can answer cryptographically (yes/no with proof) without revealing the actual detailed composition. This zero-knowledge-inspired approach allows regulatory compliance verification without exposing competitively sensitive manufacturing data.

The integration of these privacy-preserving verification techniques with the broader DID/VC infrastructure creates a layered trust architecture where different stakeholders receive different levels of data access based on their verified identity and legitimate need — regulators see comprehensive data, consumers see summary sustainability scores, and competitors see only the minimum information required for interoperability. [5]