The Ecodesign For Sustainable Products Regulation And Potential Impacts On IPRs

The Ecodesign for Sustainable Products Regulation (ESPR) took effect on July 18, 2024, replacing the Ecodesign Directive (2009/125/EC). It introduces additional ecological criteria and obligations for a wider range of products, aiming to establish sustainable products as the standard in the EU market and address greenwashing.

Key changes will impact product design, materials, labeling, disclosure of sustainability credentials, manufacturing processes and destruction of goods. These changes will affect not only the industrial and commercial aspects of production and distribution of goods in and outside Europe but also intellectual property strategies. It is increasingly evident that holding Intellectual Property Rights (IPRs) in Europe no longer ensures that a product can be manufactured, imported, or sold there; compliance with sustainability requirements under the ESPR is a prerequisite. In this regard, the ESPR serves as a strong reminder of the need to realign IP strategies to more effectively address sustainability objectives.

1. Objective and approach of the ESPR

The Conference of the Parties (COP) 26, held in Glasgow in 2021, faced criticism for not adequately addressing greenwashing, such as companies focusing on carbon offsetting rather than reducing their own greenhouse gas emissions. In response, the ESPR seeks to ensure that products manufactured or imported into the EU market are intrinsically sustainable. It establishes Ecodesign and Performance Requirements for a broad array of products throughout their life cycle, aiming to improve circularity, energy performance, accountability, and overall sustainability. Assessments are guided by environmental data measured using Life Cycle Assessment (LCA).

Ecodesign is defined in the ESPR as the "integration of environmental sustainability considerations into the characteristics of a product and the processes taking place throughout the product's value chain" (Article 2 (6) of the ESPR).

2. Scope of the ESPR

2.1 Covered products

With only a few exceptions, the ESPR applies to almost all types of products placed on the EU market, including product components and intermediate products. Covered products comprise consumer electronics, household appliances, commercial machinery, toys, furniture and textiles. The few product categories excluded from the ESPR are food, feed, medicinal products, living plants and animals, products of human origin, microorganisms, and vehicles (except e-bikes and e-scooters). Motor vehicles are already regulated by other EU legislation, such as the harmonized EU type-approval framework.

Under the ESPR, the EU Commission will introduce the Ecodesign and Performance Requirements through delegated acts, gradually covering different products and product groups. The initial focus will be on environmentally impactful products including iron and steel, aluminum, textiles, furniture, tyres, detergents, paints, lubricants, chemicals, certain energy-related products as well as information and communication technology products and other electronics.

2.2 Entities

i.  EU and non-EU economic operators

The ESPR applies to “any physical good” placed on the EU market or put into service. According to the European Commission Impact Assessment for the ESPR, the requirements apply “in a non-discriminatory manner to EU and non-EU companies,” meaning they include products placed by non-EU market economic operators. This is irrespective of the size of the operators involved and includes SMEs.

ii. Economic operators

The ESPR targets economic operators along the value chain, including manufacturers, importers, distributors, dealers (retailers, sellers), and service providers. The manufacturer, with detailed knowledge of the design and production process, is responsible for conducting or arranging the conformity assessment procedure. Importers must ensure that the products they place on the EU market meet the conformity assessment requirements and that the CE marking and documentation prepared by manufacturers are available for inspection by national authorities. Importers must also ensure, where applicable, that a Digital Product Passport (DPP) is available for those products.

3. Key obligations on economic operators

Key obligations on economic operators under the ESPR encompass the life cycle of products from production to distribution.

3.1 Ecodesign and Performance Requirements

Products must meet both quantitative and qualitative requirements, known as “Ecodesign Requirements” and “Performance Requirements,” to achieve a specified sustainability level. Only then are they permitted to be manufactured, imported, and distributed in the EU market.

There is no definition for “environmental sustainability” in the ESPR. Instead, the sustainability level is assessed considering specific parameters listed in Article 5(1), as follows:

“Durability; reliability; reusability; upgradability; reparability; possibility of maintenance and refurbishment; presence of substances of concern; energy use and energy efficiency; water use and water efficiency (added by the Council); resource use and resource efficiency; recycled content; possibility of remanufacturing; possibility of recycling; possibility of recovery materials; environmental impacts, including carbon and environmental footprint; expected generation of waste.”

3.2 Information Requirements

Information on sustainability performance must be made available, as specified for each product category, for customers and other stakeholders. This includes guidance on how to use, maintain, and repair products, as well as information for treatment facilities on disassembly, reuse, refurbishment, recycling, or disposal. Additionally, any other information that could influence sustainable product choices by customers must be provided.

For some product groups, the EU Commission might decide to impose only information requirements rather than performance requirements. In such cases, the Commission will need to provide justification for this decision.

3.3 Obligations on Substances of Concern

The ESPR introduces specific requirements for so-called substances of concern (“SoC”). SoC cover the following:

A closed list of substances identified in other EU laws, that is, (1) substances of very high concern (SVHC) designated under REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals), (2) substances that are classified under the harmonized classification of the Classification, Labelling and Packaging (CLP) Regulation, and (3) persistent organic pollutants (POPs) regulated under Regulation (EU) 2019/1021.

For example 2-benzyl-2-dimethylamino-4'-morpholinobutyrophenone is considered as substances of very high concern (SVHC) designated under REACH.

An open list of additional SoC, which are considered of concern from a sustainability perspective; the Commission is empowered to designate as SoC substances that negatively affect the reuse and recycling of materials in specific products and will designate these substances in separate delegated acts using a product-specific approach.

All SoCs will be tracked with information in the DPP. This aims to provide consumers and waste management operators with information about the presence and concentration of SoCs in a product, such as for recycling purposes.

The ESPR includes the possibility to impose restrictions on those SoCs that negatively affect a product's sustainability, such as durability and recyclability.

3.4 Digital Product Passport

The ESPR will introduce a Digital Product Passport (DPP) for all in-scope products to make sustainability information available to consumers and authorities. Similar to the Ecodesign and Performance Requirements, the DPP will follow a product category approach. The European Commission will specify in delegated acts which information must be disclosed in the DPP for each product group.

The information in the DPP may include a unique product identifier, unique operator identifier (e.g., manufacturer), unique facility identifier (e.g., factory), Global Trade Identification Number (GTIN), user manuals, EU declarations of conformity, technical documentation, and information for consumers and other operators on product maintenance and repair. This would enable the tracing of actors and manufacturing facilities related to that product.

The DPP information will be stored in a central DPP registry with a searchable web portal accessible to consumers and authorities. The DPP will be technologically neutral, meaning there is no prescribed method to comply with the requirement. In practice, the DPP will take the form of a data carrier (e.g., QR code) physically present on the product or packaging or on accompanying information, meeting certain minimum standards. However, derogations may be allowed depending on the nature, size, or use of the products concerned.

Products without a DPP will not be allowed on the EU market. Imports into the EU must provide the DPP for verification by customs authorities during the customs procedure for release into free circulation within the EU.

3.5 Obligations on unsold goods

The ESPR introduces obligations concerning unsold goods. Economic operators will need to report the quantities of discarded unsold goods and implement measures to prevent their destruction. Annex VII of the ESPR specifies a ban on the destruction of certain categories of unsold goods in the EU, namely apparel and footwear, with the possibility of extending the ban to other products in the future. The ban will take effect from July 19, 2026, for economic operators and from July 19, 2030, for medium-sized enterprises. Small and micro enterprises are exempt from this ban.

4. Enforcement

4.1 Administrative enforcement

The ESPR will be enforced by existing Market Surveillance Authorities (MSAs) and customs authorities in EU Member States. Each Member State must adopt a market surveillance plan to enforce the ESPR, detailing the nature and number of planned checks within their jurisdiction.

MSAs in the Member States will enforce product compliance rules within the internal market, while customs authorities will control products entering the EU. The European Commission will also play a key role by managing a DPP Registry and may organize joint market surveillance and testing projects in areas of common interest. An Administrative Cooperation Group (ADCO) of market surveillance authorities will meet to coordinate activities and identify common priorities.

Member States must implement national laws on penalties for non-compliance. While penalties may vary among Member States, fines and exclusion from public procurement must be established as minimum requirements. National legislators may also include other measures, such as criminal sanctions. When establishing penalties, Member States must ensure that various criteria set by the ESPR are reflected, including the financial situation of the responsible party (e.g., total turnover), the economic benefits from non-compliance, and the environmental damage caused.

4.2 Private enforcement

The legislators have also introduced a consumer right to claim compensation for non-compliance damage from the product's manufacturer, EU importer or authorised representative, or fulfilment service provider; so-called “private enforcement” (Whereas no. 117 of the ESPR).

5. Rethinking Intellectual Property strategies

The Ecodesign and Performance Requirements, DPP, and obligations on unsold products affect IPRs necessitating a realignment of IP strategies to better meet sustainability objectives. Some of the components of realigning IP strategy are summarized below.

6. Entry into force of the ESPR

The EU Commission is expected to adopt the first ESPR Working Plan in March 2025, outlining initial measures and targeted products. Based on this plan, the first Ecodesign Requirements are expected to be released in 2026.

The Commission will publish technical DPP standards to guide companies and DPP providers by December 31, 2025. By July 19, 2026, the Commission will set up a digital registry to securely store at least the unique identifiers.

In the delegated acts, the Commission must allow economic operators adequate time to comply with the Ecodesign requirements specified, especially considering the needs of SMEs and microenterprises. The application date of a delegated act must be at least 18 months from its entry into force, unless exceptions are justified for the entire act or certain specific requirements. Additionally, in cases of partial repeal or amendment of delegated acts, an earlier application date may be set.

7. What steps should companies take to prepare for the implementation of the ESPR?

The ESPR introduces Ecodesign and Performance Requirements across a broad range of products, initially focusing on a select group of energy-intensive items. It's advisable to determine if products fall under this initial scope. Since Ecodesign is aimed at reducing product and manufacturing process carbon footprints, it is highly likely that the ESPR will require LCA data. Therefore, companies should start by evaluating their product's environmental footprint with LCA and make adjustments in the production, assembling or storage steps as needed. Reviewing distributorship and outsourcing agreements to include liability provisions and verification of carbon footprint impacts of manufacturing, storing activities is also highly recommended.

The ESPR will also necessitate a realignment of IP strategies to align with sustainability goals. This includes adapting the scope of protection and enforcement of IPRs, addressing exclusions such as repair rights, reuse, and remanufacturing. Companies should also consider SEPs (Standard Essential Patents) as a way to control specific sectors of industry and establish themselves as pioneers.

We can also anticipate a rise in litigation over greenwashing claims between competitors, as demonstrated by a recent case before the Court of Gorizia involving Alcantara S.P.A. and Miko S.R.L. The Italian court found the defendant's claims to be “vague, generic, false, and non-verifiable,” and mandated their immediate removal to prevent unfair competition. This could signal a shift towards greenwashing disputes as a prominent enforcement strategy, potentially overshadowing traditional IP disputes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.