By Claudia Schmidhäuser, Senior Principal, Product Management, Forterro
Europe’s midmarket manufacturing landscape is undergoing a vast transformation. As the EU accelerates its push toward a circular economy, manufacturers face an increasingly complex web of regulations. Chief among them is the forthcoming Digital Product Passport (DPP), set to become the backbone of Europe’s sustainability and circularity strategy.
For midmarket manufacturers, this represents both a challenge and an opportunity. The systems that once served primarily operational needs, such as Enterprise Resource Planning (ERP), are now becoming the backbone of environmental compliance. ERP, long seen as a back-office focused driver of efficiency, is evolving into a powerful enabler of traceability, transparency, and sustainable value creation.
Understanding the Circular Economy
The EU’s circular economy strategy aims to close the loop on resource use by embedding sustainability throughout the entire product lifecycle, from raw material sourcing to recycling and reuse. For this to succeed it requires complete visibility of material flows, emissions, and product composition.
This is where the DPP comes in. Each product will carry a digital identity, containing verified information about its origins, materials, carbon footprint, and repairability. For regulators, it’s a way to enforce environmental accountability. For many midsize manufacturers, it will be impossible to comply without digital support for both data collection and secure access.
ERP: operations platform to compliance backbone
As these requirements take shape, ERP systems are being asked to do far more than manage stock and orders. They must integrate emissions data, track provenance, and enable secure connections to expert systems, such as ESG reporting tools.
Modern ERP platforms already store operational data that can underpin sustainability reporting, including material inputs, energy use, and production waste. For example, Forterro has expanded the range of functions for batches and serial numbers, allowing the life cycle of a product to be displayed at any time. In addition, AI-driven production optimisation can be used to analyse production processes in a resource-efficient manner. With the digital twin, users can create a virtual model of their machines and processes, a milestone on the road to the digital future.
But new regulations are expanding the scope of what ERP must do. Integration with cloud platforms and third-party systems is becoming essential to meet DPP and other requirements, such as the Corporate Sustainability Reporting Directive (CSRD), and Corporate Sustainability Due Diligence Directive (CSDDD).
The midmarket compliance gap
Forterro’s European Industrial Midmarket Research 2025 paints a worrying picture. Fewer than half of European midmarket firms (49%) say they are even aware of the DPP, and only half feel prepared to meet its requirements. Complexity and lack of resources are the biggest barriers, each cited by 42% of respondents.
For many, the issue isn’t willingness but a lack of capability. Most midmarket manufacturers are not well prepared, many lack dedicated sustainability teams and are still coming to terms with the scale of change. DPP compliance requires rethinking master data management, ensuring interoperability, and adopting secure digital infrastructure.
Building the digital foundations of circularity
ERP modernisation is becoming synonymous with ESG readiness. According to Forterro’s 2025 research, 33% of midmarket firms now list ESG reporting as their top driver for digital transformation, followed by regulatory compliance (29%).
Cloud ERP adoption is rising sharply. 39% of firms now run ERP in the cloud, with that figure expected to exceed 45% in the coming years. Cloud connectivity enables the secure data sharing and real-time reporting essential for DPP and CSRD compliance.
But technology alone isn’t enough. Midmarket firms must also address cultural and skills barriers. Over 40% of manufacturers report shortages in ERP expertise and AI literacy, and collaboration, training, and clear leadership will be critical to bridging this digital-ESG divide.
Acting early matters
Those who prepare early stand to gain far more than regulatory compliance. They will achieve cost savings through digitalisation, improved environmental performance, and enhanced appeal to investors, customers and partners who prioritise ESG credentials.
Ultimately, the DPP represents more than another compliance challenge: it’s a catalyst for digital transformation across Europe’s industrial base, and ERP systems are emerging as strategic tools for circularity and resilience.
Companies must establish a transparent data structure to record relevant product information and document their supply chains accurately. This forms the basis for a wide range of environmental, compliance, and trade regulations, and thus also for the upcoming DPP.
For Europe’s midmarket manufacturers, the message is clear: the circular economy is coming, and ERP will be its digital backbone. Those who act now will not only stay compliant, but thrive in a greener, more transparent industrial future.
Claudia Schmidhäuser, Senior Principal, Product Management, Forterro www.forterro.com
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