Digital Product Passport: Europe will soon read our labels

Around 2029, a buyer in Europe will scan a code on a Pakistani bedsheet and expect to see where its cotton was grown, which mill spun the yarn, which dyes were used, how much energy went into making it. That is the practical meaning of the EU’s Digital Product Passport (DPP), which will apply to textiles once the relevant delegated act is adopted, expected in late 2027.

The legal obligation falls on brands and importers. The information, however, must come from the mills and suppliers that made the product.

The EU took about $8.96 billion of Pakistan’s exports in FY2025-26, roughly 30% of the total, and textiles and clothing account for 70 to 76% of that trade. Textile exports reached $17.93 billion, a rise of just 0.26%, while national exports fell 5.9% to $30.1 billion.

Knitwear alone brought in $4.97 billion, readymade garments $4.29 billion and bedwear $3.11 billion. A sector carrying this much of the economy cannot afford to lose its most valuable market for want of data.

DPP asks every exporter three questions: where was this product made, with what energy, and can every supplier in the chain prove its part? Pakistan’s answers are strong on the first, promising on the second and weak on the third. In each case, policy will decide whether those strengths reach the DPP.

There is a reasonable case that DPP works in Pakistan’s favour. On origin, the industry is unusually integrated. Many exporters buy local cotton, then spin, weave, process and stitch within a single group. Vietnam, the third largest garment exporter, relies heavily on imported fabric, and Bangladesh imports most of its cotton and much of its yarn. When DPP asks for the origin of each production stage, an integrated supplier in Faisalabad has a shorter chain to document.

On energy, the grid is better than assumed. According to Ember, low-carbon sources supplied about 55% of Pakistan’s electricity in 2025, above the global average. A garment made with Pakistani grid power may carry a lower footprint than one made in Vietnam or Bangladesh, where coal and gas dominate. Turning this into evidence that a buyer accepts is where policy works against industry. PTC estimates that exporters pay about 13.2 US cents per kilowatt-hour, against 10.2 cents in Bangladesh and 7 cents in Vietnam.

Then the Competitive Trading Bilateral Contracts Market (CTBCM) became operational and it was meant to let bulk consumers buy electricity directly, including from renewable generators. Buyer requirements show why this matters. Under Inditex’s GTW, suppliers seeking its top environmental ratings must draw a significant portion of their electricity from renewable sources.

Rooftop solar rarely covers that share for a large composite mill, and few Pakistani factories reach Inditex’s top ratings. CTBCM offered the first route to buy renewable power through the grid, but the volume on offer is meagre. Industry accounts for about 36% of Pakistan’s national demand of roughly 26GW, or nearly 9.4GW.

The first auction covers only 400 megawatts, about 4.3% of industrial demand, to be shared among more than 3,000 bulk consumers, and even the full 800MW allocated across both phases would meet just 8.5% and wheeling charges notified in September reach Rs9-12 for the industry and Rs18-19 for commercial participants. Most mills are left without a route to the renewable electricity that would lower the footprint reported in their passports.

Vietnam opened direct renewable purchases to large consumers in 2025. Pakistan lacks such a recognised system of renewable energy certificates, so mills cannot claim the clean share of the grid they pay for.

Heat is a separate problem. Much of the steam for dyeing and finishing comes from biomass, which lowers fossil emissions but is traded largely informally. Prices swing with harvests, quality varies, and few mills can say where their fuel came from. Fuel standards, a register of suppliers and a basic chain of custody would cost the government little.

The third question is where Pakistan is weakest. A passport is only as complete as its least documented supplier. The heaviest burden will fall on small and medium enterprises (SMEs): accessory makers, independent dye houses, stitching contractors etc. Bangladesh now has 280 LEED-certified garment factories, but that progress came largely from large exporters with finance and buyer support.

In Vietnam, banks and development partners have begun offering green credit and DPP readiness toolkits to apparel SMEs. Pakistan has nothing comparable at national level. If small suppliers cannot produce the data, large exporters will replace them with suppliers abroad, weakening the domestic chain that is the industry’s main advantage.

None of this makes DPP a threat. It will reward firms that can prove their claims, which suits an integrated industry. The cost of that proof, however, cannot rest on suppliers alone. Brands set the requirements and benefit from the data, which makes them natural partners in meeting them. They can share that cost by co-financing, offering longer contracts that justify investment in renewable power, and helping smaller suppliers build data systems. This shared transition responsibility, which also extends to government, development partners and industry associations, is what will turn the passport from a compliance cost into a competitive advantage for Pakistan.

The article does not necessarily reflect the opinion of Business Recorder or its owners.