As the EU tightens its regulations, many countries view compliance as a mere obligation, but the implications of this can have benefits far beyond maintaining trade relations.

By aligning with sustainability standards, Pakistan can unlock access to global value chains, drive export-led growth, and tackle long-standing inefficiencies in the industrial value chain, including under-reporting, sales tax evasion, and the misuse of EFS.

With the EU accounting for 30 percent of Pakistan’s total exports, any regulatory shift from the EU will inevitably impact Pakistan’s trade. Rather than viewing this as a challenge, the policymakers need to turn this into an opportunity. While Pakistan has made progress under the GSP since 2014, continued access to the EU market will now depend upon compliance with their emerging regulations.

One such framework is the Digital Product Passport (DPP) under the Eco-design for Sustainable Products Regulation (ESPR), which was introduced in mid-2023 and will be enforced from 2027 onwards in sectors such as textiles, metals, and batteries.

As the name suggests, the DPP represents a digital transformation in the industry’s value chain, enhancing transparency by digitally documenting product origins and production processes. It ensures due diligence in human rights and environmental standards across the value chain, preventing any product from qualifying for export without meeting transparency requirements. These requirements will be verified through a QR code displaying key production details, hence making the DPP a mandatory requirement for exporting to the EU.

But there’s more to it. Beyond ensuring due diligence, digitization through the DPP offers a real-time solution to perennial issues like under-invoicing, under-reporting, and EFS misuse. Pakistan must recognize this as a strategic advantage. Greater transparency will not only enhance access to global markets but also reinforce tax compliance.

Why digitizing the value chain through DPP is imperative?

Since 2013, Pakistan’s exports to the EU have grown significantly, with total exports increasing by 76 percent and textile exports by 87 percent. However, as buyers now prioritize transparency and traceability, the DPP is no longer just a compliance requirement - it is a binding regulatory necessity for maintaining and expanding Pakistan’s presence in the EU market.

Given this shift, it is crucial to recognize the link between the DPP........

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