Digital Product Passports as Institutional Innovation: Reshaping Information Asymmetries and Enabling Circular Market Formation

ABSTRACT

The transition toward a circular economy (CE) is frequently constrained not by the absence of circular business model (CBM) designs, but by persistent information asymmetries, fragmented data governance, and high transaction costs across product lifecycles. Despite increasing regulatory attention, the economic mechanisms through which Digital Product Passports (DPPs) may influence market structures and innovation dynamics remain under-theorized. This article conceptualizes the DPP as an institutional innovation infrastructure that restructures information flows, reduces uncertainty, and enables the formation and scaling of circular markets.

Drawing on innovation economics, transaction cost theory, and institutional analysis, the paper argues that standardized, interoperable lifecycle data transform sustainability attributes from credence characteristics into verifiable and tradable information. By reducing information asymmetries between suppliers, producers, consumers, repairers, remanufacturers, resellers, recyclers, financiers, economic sectors, and regulators, DPP infrastructures lower coordination costs and facilitate new contractual forms such as product-as-a-service, residual-value-based financing, authenticated resale, and data-driven remanufacturing. The analysis identifies four core mechanisms through which DPPs reshape innovation dynamics: (1) asymmetry reduction, (2) transaction cost mitigation, (3) capability amplification, and (4) circular market formation.

Rather than framing DPPs as compliance instruments, this study positions them as market-enabling governance architectures that influence competitive dynamics, investment incentives, and industrial transformation. The paper contributes to the literature by bridging CE research with innovation economics and institutional theory, offering a systemic explanation of how data governance infrastructures can catalyse CBM innovation. Policy implications highlight the importance of interoperability standards, polycentric governance arrangements, and SME capability support to prevent fragmentation and unequal participation in emerging circular ecosystems.

Keywords

Digital Product Passport; Circular Economy; Circular Business Model; Information Asymmetries; Transaction Costs Sustainability; Interoperability;

1. Introduction

The transition toward a CE has increasingly been framed as a challenge of CBM Innovation, technological upgrading, and regulatory alignment. Yet despite a proliferation of CBM archetypes—ranging from product-as-a-service and remanufacturing to reuse platforms and material recirculation—empirical evidence suggests that large-scale circular transformation remains limited. Global material extraction continues to rise, secondary material markets remain underdeveloped, and circular initiatives often struggle to scale beyond pilot stages. This paradox indicates that the primary barrier to circular transition may not lie in the absence of innovative business models per se, but rather in structural economic frictions embedded within existing market architectures. In particular, persistent information asymmetries, fragmented lifecycle data, and high transaction and coordination costs inhibit investment, trust formation, and cross-actor collaboration across product value chains.

From an innovation economics perspective, circular markets are characterized by uncertainty regarding product composition, durability, reparability, residual value, and environmental performance, attributes that frequently function as credence characteristics and are difficult to verify ex ante. Under such conditions, adverse selection, moral hazard, and risk premia constrain the emergence of secondary markets and performance-based contractual forms. Regulatory initiatives such as the European Union’s DPP seek to address these frictions by institutionalizing standardized, interoperable lifecycle data infrastructures. However, while existing scholarship has examined DPPs primarily through technical, compliance-oriented, or sector-specific lenses, their broader economic implications for market formation, innovation dynamics, and competitive restructuring remain insufficiently theorized. This article advances the argument that DPPs should be understood not merely as traceability tools, but as institutional innovation infrastructures capable of reshaping information flows, reducing transaction costs, and enabling the scaling of circular markets.

Against this background, this article addresses the following research question: How do DPPs function as institutional innovation infrastructures that reshape information asymmetries and enable the formation and scaling of circular markets? Building on innovation economics, transaction cost theory, and institutional analysis, the study develops a conceptual framework explaining the economic mechanisms through which standardized, interoperable lifecycle data alter coordination dynamics across product ecosystems. Specifically, it identifies four interrelated mechanisms—information asymmetry reduction, transaction cost mitigation, capability amplification, and circular market formation—through which DPP infrastructures influence competitive behaviour, contractual innovation, and investment incentives. By reframing DPPs as market-shaping governance architectures rather than compliance instruments, the paper contributes to the literature on innovation systems and institutional change, offering a systemic account of how data governance infrastructures can catalyse circular business model innovation and industrial transformation.

2. Theoretical Foundations

2.1 Innovation Economics and Market Formation

Innovation economics has long emphasized that technological change alone is insufficient to generate new markets; institutional arrangements, standards, and governance structures play a central role in shaping innovation trajectories. Markets for new technologies or business models do not emerge spontaneously, but are constructed through coordinated rule-setting, infrastructure development, and institutional stabilization. Standards, certification systems, and interoperability protocols frequently function as enabling infrastructures that reduce uncertainty, align expectations, and create conditions for investment and scaling. From this perspective, CE transformation can be interpreted not merely as a technological shift, but as a process of market formation requiring institutional reconfiguration.

CBMs such as product-as-a-service, resale, remanufacturing, and secondary material markets depend on stable expectations regarding product quality, durability, repairability, composition, and residual value. When such information remains fragmented or unverifiable, innovation incentives weaken and coordination costs increase. Innovation economics therefore suggests that the scalability of circular markets depends on institutional mechanisms capable of structuring information flows and reducing systemic uncertainty.

2.2 Information Asymmetry and Transaction Costs in Circular Markets

Circular markets differ fundamentally from conventional linear markets because value creation extends beyond the point of initial sale and depends on product longevity, reversibility, and material recoverability. In such contexts, economic exchanges rely heavily on information regarding product composition, durability, maintenance history, residual value, and environmental performance. These attributes are often difficult to observe or verify prior to transaction and frequently function as credence characteristics. As a result, circular exchanges are particularly exposed to information asymmetries between producers, users, secondary market actors, and financiers.

When information asymmetries persist, several well-documented economic distortions arise. Adverse selection may occur in secondary markets if buyers cannot reliably distinguish between high- and low-quality used products, leading to price compression and underinvestment in durable design. Moral hazard may emerge in product-as-a-service or leasing contracts when performance conditions are difficult to monitor across the lifecycle. Similarly, uncertainty regarding residual value and material recoverability can increase risk premia in financing circular assets, limiting capital availability for remanufacturing and reuse-oriented ventures. In each case, imperfect information raises transaction costs by increasing negotiation complexity, monitoring requirements, and enforcement burdens.

Beyond firm-level exchanges, information fragmentation also generates systemic coordination problems. Circular value chains typically involve multiple heterogeneous actors—suppliers, manufacturers, service providers, repairers, resalers, refurbishers, recyclers, and intermediaries—whose incentives depend on shared access to reliable lifecycle data. When such data are dispersed across incompatible systems or retained within proprietary silos, coordination costs escalate and collective action becomes fragile. In institutional economics terms, the absence of standardized and transferable information infrastructures inhibits the development of stable expectations and reduces the feasibility of complex contractual forms. Consequently, circular markets remain structurally constrained not only by technological barriers, but by informational and governance deficiencies embedded within existing economic architectures.

This perspective suggests that overcoming CE stagnation requires more than the proliferation of innovative business models. It requires institutional mechanisms capable of transforming sustainability-related attributes from opaque, credence-based signals into structured, verifiable, and exchangeable information. By lowering uncertainty and transaction costs across the product lifecycle, such mechanisms may create the preconditions for the scaling of CBMs and the emergence of robust secondary markets.

2.3 Institutional Innovation and Data Governance Infrastructures

Institutional economics and innovation studies emphasize that markets are not self-organizing arenas of exchange, but socially constructed systems embedded within rule structures, governance arrangements, and shared infrastructures. New markets—particularly those characterized by uncertainty and complex interdependencies—often require institutional innovation to stabilize expectations, reduce coordination costs, and align incentives across heterogeneous actors. Standards, certification schemes, interoperability protocols, and shared data architectures have historically played a foundational role in enabling market formation by structuring information flows and reducing systemic ambiguity.

In this sense, institutional innovation refers not merely to regulatory intervention, but to the creation of governance frameworks and infrastructural arrangements that reshape economic interactions. When standards become widely adopted, they function as coordination devices that lower transaction costs, enhance comparability, and facilitate investment. Similarly, shared data infrastructures can transform dispersed and proprietary information into collectively usable knowledge, enabling new forms of contractual organization and value creation. Innovation economics has long recognized that such infrastructural layers—ranging from accounting standards to digital communication protocols—serve as enabling conditions for industrial transformation and the emergence of new competitive dynamics.

The growing digitalization of economic activity has further amplified the importance of data governance as a central institutional domain. Data are not neutral inputs; they are governed resources whose accessibility, interoperability, and legitimacy depend on rule-setting at multiple levels. Legal frameworks, technical standards, organizational agreements, and trust mechanisms collectively determine whether data remain fragmented within isolated systems or become part of broader innovation ecosystems. In complex value chains, the absence of interoperable governance structures prevents data from being mobilized as a shared asset, thereby limiting collective learning and coordinated experimentation.

From this perspective, data governance infrastructures can be understood as institutional mechanisms that structure how information is generated, validated, accessed, and exchanged across economic actors. By embedding interoperability standards, defining usage rights, and establishing verification mechanisms, such infrastructures reduce uncertainty and enable new forms of collaboration and competition. In markets characterized by lifecycle interdependencies—such as those central to CE transitions—the institutionalization of shared data architectures may therefore function as a precondition for scalable CBM innovation. Rather than acting as peripheral compliance tools, data governance infrastructures can reshape the economic architecture of markets by altering information asymmetries, transaction costs, and incentive structures at systemic levels.

3. DPPs as Institutional Innovation Infrastructure

DPPs represent one of the most ambitious contemporary attempts to institutionalize standardized lifecycle information within product markets. Emerging most prominently under the European Union’s Ecodesign for Sustainable Products Regulation (ESPR), the DPP introduces a structured, interoperable, and machine-readable framework for documenting product composition, environmental performance, durability, reparability, and end-of-life pathways. While frequently discussed as a regulatory compliance instrument or traceability tool, the DPP can be more fundamentally interpreted as a market-shaping institutional innovation.

In line with the theoretical foundations outlined above, the DPP does not merely collect data; it restructures the informational architecture within which economic exchanges occur. By embedding standardized and verifiable lifecycle data into products themselves, the DPP transforms previously opaque attributes—such as material origin, actors involved, environmental footprint, durability, repairability, maintenance history, and recovery potential—into accessible and comparable information. In doing so, it directly addresses the informational frictions that inhibit circular market formation, shifting sustainability characteristics from credence-based claims toward verifiable economic signals.

From an innovation economics perspective, the DPP functions as an enabling infrastructure that alters incentive structures and coordination dynamics across product ecosystems. Suppliers, manufacturers, distributors, logistics companies, service providers, repairers, remanufacturers, refurbishers, recyclers, financiers, and regulators operate within interconnected value chains where lifecycle data determine risk assessment, contractual design, and investment decisions. By institutionalizing interoperability standards and data governance mechanisms, the DPP reduces uncertainty across these interdependencies and creates conditions under which new contractual forms—such as product-as-a-service, performance-based agreements, authenticated resale markets, and residual-value financing—become economically viable at scale.

Importantly, the transformative potential of the DPP does not derive solely from regulatory enforcement, but from its capacity to stabilize expectations and align incentives across heterogeneous actors. Like historical standardization movements that enabled industrial expansion—such as accounting norms, quality certification systems, or digital communication protocols—the DPP introduces a shared informational substrate that may reshape competitive dynamics and lower entry barriers in emerging circular markets. Its institutionalization thus represents not merely a sustainability intervention, but a structural reconfiguration of the informational foundations of product-based industries.

3.1 Mechanism I: Information Asymmetry Reduction

A central mechanism through which DPPs operate as institutional innovation infrastructures is the systematic reduction of information asymmetries across product lifecycles. As discussed in Section 2.2, circular markets are particularly vulnerable to asymmetric information problems because product value extends beyond initial ownership and depends on attributes that are often difficult to observe, verify, or quantify ex ante. Durability, reparability, material composition, environmental footprint, and residual value frequently function as credence characteristics, limiting the ability of buyers, secondary market actors, and financiers to accurately assess quality.

In the absence of standardized lifecycle information, economic actors rely on reputational signals, voluntary disclosures, or private certification schemes, all of which vary in credibility and comparability. This informational opacity contributes to adverse selection in secondary markets, compresses price differentiation between high- and low-quality circular products, and weakens incentives for producers to invest in durable design. Similarly, financiers and insurers may apply conservative risk assessments to CBMs when residual value and material recoverability remain uncertain.

By institutionalizing interoperable and verifiable lifecycle data at the product level, the DPP restructures these informational conditions. Rather than depending on unilateral claims or fragmented documentation, actors can access standardized datasets that accompany products across supply chain stages and use phases. This transformation shifts sustainability attributes from ambiguous signals to structured economic information, enhancing comparability and reducing informational rents derived from opacity. In economic terms, the DPP lowers information search and verification costs while reducing the scope for opportunistic behaviour linked to hidden characteristics.

Importantly, the asymmetry reduction effect operates not only at the dyadic transaction level but at the systemic level of market formation. When standardized lifecycle information becomes embedded within products, expectations regarding environment footprint, durability, repairability, material integrity, and recovery potential can stabilize across actors. Such stabilization enables more accurate pricing in secondary markets, improves quality differentiation, and strengthens incentives for upstream investment in circular design. The DPP thus functions as a signalling infrastructure that reconfigures how product quality and sustainability performance are perceived, evaluated, and capitalized within markets.

Through this first mechanism, DPP infrastructures address a foundational barrier to circular economy scaling: the persistence of hidden product attributes that distort market outcomes. By reducing informational opacity, they create preconditions for more efficient allocation of resources and lay the groundwork for the subsequent mechanisms of transaction cost mitigation, capability amplification, and circular market formation.

3.2 Mechanism II: Transaction Cost Mitigation

While the reduction of information asymmetries addresses hidden product characteristics, a second and closely related mechanism through which DPPs reshape circular markets concerns the mitigation of transaction costs. In circular value chains, exchanges are typically more complex, longer-term, and interdependent than in linear production systems. Product-as-a-service arrangements, remanufacturing agreements, take-back schemes, and secondary market transactions require sustained coordination among multiple actors across extended time horizons. Such arrangements increase exposure to negotiation, monitoring, enforcement, and adaptation costs.

From a transaction cost economics perspective, circular contracts often involve higher asset specificity and lifecycle interdependence than conventional sales contracts. Investments in durable design, modular components, reverse logistics systems, or remanufacturing capabilities create quasi-specific assets whose value depends on reliable coordination across the lifecycle. In the absence of credible and standardized information infrastructures, actors must rely on bespoke contractual safeguards, costly verification mechanisms, or vertical integration strategies to manage uncertainty. These responses, while protective, raise governance costs and may deter smaller firms from participating in circular ecosystems.

The institutionalization of interoperable lifecycle data through the DPP alters these governance conditions. By embedding structured and verifiable information within products, the DPP reduces the need for repeated bilateral data exchanges, customized auditing processes, and costly third-party validation procedures. Standardized documentation of material composition, maintenance history, actors involved, and performance indicators lowers ex post verification costs and facilitates the enforcement of performance-based or outcome-oriented contracts. In this sense, the DPP functions as a coordination infrastructure that reduces the friction associated with complex, multi-actor transactions.

Moreover, transaction cost mitigation extends beyond individual contractual relationships to ecosystem-level governance. Circular markets depend on interoperability across heterogeneous actors—suppliers, manufacturers, service providers, repair networks, logistics operators, users, and recyclers—whose activities must align to preserve material value. When lifecycle data are fragmented across incompatible systems, coordination requires manual reconciliation, negotiation of access rights, and the management of informational disputes. The DPP’s standardized data architecture reduces these coordination burdens by providing a shared informational reference point, thereby lowering collective governance costs and enabling more scalable collaboration.

By mitigating transaction costs, DPP infrastructures increase the economic feasibility of circular business models that would otherwise remain confined to niche applications. Reduced governance frictions improve the viability of long-term leasing arrangements, authenticated resale platforms, condition-based buy-back schemes, and residual-value financing structures. In doing so, the DPP does not merely enhance efficiency within existing exchanges; it expands the feasible set of contractual forms available to market actors. This second mechanism thus builds upon asymmetry reduction by translating improved information quality into lower coordination and governance costs, creating conditions for broader structural transformation within circular markets.

3.3 Mechanism III: Capability Amplification

Beyond reducing informational opacity and transaction costs, DPPs may also reshape innovation dynamics by amplifying organizational and ecosystem-level capabilities. In innovation economics, the ability of firms to generate, distribute and capture value depends not only on technological inputs, but on access to structured knowledge and the institutional conditions that support learning, coordination, and experimentation. When critical information remains fragmented or proprietary, firms’ capacity to innovate in new market domains is constrained by limited visibility and high uncertainty.

CBM Innovation is particularly sensitive to such constraints. Designing product-as-a-service systems; reverse logistics networks; remanufacturing, refurbishing, and resaling operations; or secondary material platforms; require reliable data regarding product performance, usage patterns, failure rates, maintenance history, and material recoverability. In the absence of standardized lifecycle information, firms must rely on incomplete datasets, internal estimations, or costly pilot experimentation. This restricts strategic flexibility and raises the risks associated with transitioning from linear to circular revenue models.

The institutionalization of interoperable lifecycle data through DPP infrastructures alters this knowledge environment. By transforming dispersed product information into structured and transferable datasets, the DPP enhances firms’ capacity to sense circular opportunities, seize alternative contractual configurations, and reconfigure resource allocation strategies. Access to consistent product-level data enables more accurate forecasting of residual value, condition-based service planning, and design-for-recovery improvements. In doing so, the DPP expands the informational base upon which strategic decisions are made.

Importantly, capability amplification operates not only within individual firms but across ecosystems. When multiple actors share access to standardized lifecycle data, collective learning becomes possible. Suppliers can adjust material specifications based on downstream recovery data; remanufacturers, refurbishers and recyclers can optimize processes using verified design parameters; financiers can refine risk models using performance histories. This shared informational substrate supports distributed experimentation and reduces duplication of learning costs across the value chain. As a result, innovation processes become more coordinated and cumulative rather than fragmented and isolated.

In this third mechanism, the DPP functions as a knowledge-enabling infrastructure that strengthens the adaptive capacity of market participants. By lowering informational barriers to experimentation and enabling data-driven reconfiguration of business models, it enhances the feasibility and strategic attractiveness of circular innovation. Capability amplification thus complements asymmetry reduction and transaction cost mitigation by influencing not only how transactions occur, but how firms and ecosystems evolve over time.

3.4 Mechanism IV: Circular Market Formation

The cumulative effect of asymmetry reduction, transaction cost mitigation, and capability amplification is not merely incremental efficiency improvement but the potential formation, stabilization and scaling of new circular markets. In innovation economics, markets for novel goods and services do not pre-exist technological or institutional change; they emerge through processes of expectation alignment, rule stabilization, and infrastructural development. When uncertainty is high and governance structures are incomplete, business model innovation remain confined to experimental niches. Conversely, when institutional arrangements reduce systemic ambiguity, new markets can consolidate and scale.

Circular markets—such as secondary product markets, remanufacturing ecosystems, residual-value financing arrangements, and product-as-a-service platforms—are particularly sensitive to institutional preconditions. Their viability depends on predictable quality differentiation, credible durability signals, enforceable lifecycle contracts, and reliable valuation of recovered materials. Without standardized informational infrastructures, these markets remain thin, fragmented, and volatile. Investment flows are limited, entry barriers persist, and network effects fail to materialize.

By embedding interoperable lifecycle data within products and aligning governance frameworks across actors, DPPs create the informational substrate upon which circular markets can stabilize. Standardized product documentation enables quality-based price differentiation in resale markets, improves confidence in remanufactured goods, and enhances transparency in material recovery chains. Financiers and insurers can incorporate structured lifecycle data into risk models, reducing uncertainty premiums and expanding access to capital for circular ventures. As information becomes comparable and transferable across sectors and jurisdictions, coordination costs decline and cross-border market integration becomes more feasible.

Importantly, market formation is not solely an economic process but an institutional one. The DPP contributes to expectation alignment by establishing shared definitions, metrics, and reporting standards for product performance and sustainability attributes. Such standardization fosters interoperability across industries and reduces fragmentation in emerging circular ecosystems. Over time, these institutional arrangements may influence competitive dynamics by rewarding firms that design for durability, reparability, and recoverability, thereby reshaping industrial incentives and technological trajectories.

Through this fourth mechanism, the DPP operates not simply as a data repository but as a foundational market infrastructure. By transforming hidden lifecycle attributes into verifiable economic signals, lowering coordination costs, and enhancing innovation capabilities, it creates the structural conditions under which CBMs can transition from isolated experimentation to systemic market participation. Circular market formation thus represents the macro-level outcome of the preceding mechanisms, linking institutional innovation to industrial transformation within the CE.

4. Implications for Innovation Policy and Industrial Competitiveness

The conceptualization of DPPs as institutional innovation infrastructures carries significant implications for innovation policy and industrial competitiveness. If DPPs function as market-shaping governance architectures rather than merely compliance mechanisms, their design and implementation become central elements of industrial strategy. In innovation-driven economies, standards and data infrastructures influence not only transparency but also competitive positioning, technological trajectories, and the distribution of value across value chains.

First, interoperability standards emerge as a strategic policy domain. Fragmented or incompatible DPP implementations could reproduce the very coordination failures they seek to overcome, generating technological lock-in and cross-border inefficiencies. Conversely, harmonized standards may facilitate cross-sector learning, enable economies of scale in circular services, and lower entry barriers for innovative firms. In this context, DPP governance intersects with broader debates on digital sovereignty, data spaces, and platform regulation. Policymakers must therefore treat lifecycle data architectures as components of innovation infrastructure comparable to telecommunications networks or financial reporting systems.

Second, the institutionalization of lifecycle transparency reshapes competitive incentives. When product durability, reparability, and recoverability become verifiable and comparable, firms compete not only on price and brand reputation but on measurable lifecycle performance. This shift may encourage upstream investments in modular design, material substitution, and service integration. At the same time, it could disrupt incumbent business models dependent on planned obsolescence or informational opacity. Innovation policy must therefore anticipate transitional tensions and support firms in adapting to transparency-driven competition.

Third, the distributional consequences of DPP infrastructures require careful consideration. Large firms often possess the technical capabilities and financial resources to integrate interoperable data systems rapidly, whereas small and medium-sized enterprises (SMEs) may face disproportionate compliance and adaptation costs. Without targeted capability-building initiatives, digital infrastructure support, and collaborative governance frameworks, the institutionalization of DPPs risks reinforcing concentration dynamics within industrial ecosystems. Ensuring inclusive participation in emerging circular markets thus becomes a critical policy objective.

Fourth, the international dimension of DPP governance introduces questions of global competitiveness and standard-setting power. Jurisdictions that successfully institutionalize interoperable lifecycle data infrastructures may influence global value chains by setting de facto standards for product transparency. This dynamic parallels historical cases in which accounting norms, safety certifications, or digital communication protocols shaped international trade patterns. DPPs may therefore function as instruments of regulatory and technological influence, affecting market access conditions and strategic positioning in global circular industries.

Taken together, these implications suggest that DPPs should be embedded within broader innovation policy frameworks that integrate standardization, capability development, ecosystem governance, and industrial transformation. By aligning data governance infrastructures with competitiveness strategies, policymakers can reduce systemic frictions, stimulate investment in circular innovation, and foster more resilient and transparent market structures. The challenge lies not only in mandating data disclosure but in designing governance architectures that catalyse coordinated innovation while preventing fragmentation and exclusion.

5. Conclusions

This article has advanced the argument that the stagnation of CE transitions cannot be fully explained by technological constraints or the absence of CBM designs. Instead, persistent information asymmetries, fragmented lifecycle data, and high transaction costs represent structural economic barriers embedded within existing market architectures. By conceptualizing DPPs as institutional innovation infrastructures, this study has reframed the circular transition as a problem of informational governance and market formation rather than solely one of technological or managerial change.

Drawing on innovation economics, transaction cost theory, and institutional analysis, the paper has identified four interrelated mechanisms through which DPP infrastructures reshape innovation dynamics: asymmetry reduction, transaction cost mitigation, capability amplification, and circular market formation. Together, these mechanisms illustrate how standardized, interoperable lifecycle data transform sustainability attributes from opaque credence characteristics into verifiable economic signals. In doing so, DPPs influence competitive behaviour, contractual innovation, investment incentives, and industrial restructuring.

The primary theoretical contribution of this study lies in bridging CE scholarship with innovation systems and institutional economics perspectives. By positioning DPPs as market-shaping governance architectures rather than compliance tools, the analysis highlights the central role of data governance infrastructures in enabling new forms of value creation and coordination. This reframing shifts attention from firm-level adoption challenges to systemic institutional design and underscores the importance of standards, interoperability, and collective rule-setting in industrial transformation.

At the policy level, the findings suggest that the effectiveness of DPP implementation will depend on governance coherence, interoperability harmonization, and inclusive capability-building strategies. Without coordinated institutional design, lifecycle transparency initiatives risk generating fragmentation or reinforcing concentration dynamics. Conversely, when embedded within broader innovation policy frameworks, DPP infrastructures may catalyse the stabilization and scaling of circular markets.

Future research should move toward empirical examination of how DPP adoption affects market structure, pricing dynamics, secondary market depth, and investment flows in circular sectors. Comparative cross-sector and cross-jurisdictional studies would help clarify whether institutionalized lifecycle data infrastructures generate measurable competitiveness advantages or reshape global value chains. Additionally, longitudinal analyses could assess how firms adapt strategically to transparency-driven competition and how institutional complementarities evolve over time.

Ultimately, the transition toward a CE requires not only technological innovation but institutional reconfiguration. By structuring information flows and reducing systemic uncertainty, DPPs represent a significant step toward the construction of markets capable of sustaining circular production and consumption at scale. Their long-term impact will depend on how effectively governance architectures translate informational transparency into durable economic transformation.

Figure 1. Conceptual framework linking AI-enabled DPPs to CBMI through dynamic capabilities across the product lifecycle

Figure 2. Interoperability and governance architecture for DPP-enabled circular ecosystems, integrating technical, organisational, and institutional layers under data sovereignty and trust mechanisms.

Figure 3. Data flows between the Digital Product Passport and AI modules across the product lifecycle, enabling decision-making for circular strategies and stakeholder coordination.

Figure 4. Roadmap for phased adoption DPPs and AI in Ibero-America, from diagnostic and sandboxing to standardisation and scaling.
8. References