Circular AI Solutions for Business-as-Usual Companies
AI is still in its embryonic form, only just conceived and managing a heartbeat. The world was seemingly taken by surprise when ChatGPT burst into our lives heralding a whole new future we were not prepared for. The truth is AI has been building momentum for a few years and all it took was a fancy large language model to move AI into the mainstream.
The Practical Application of AI for Circular Solutions
Here is a short list of where AI can be applied to the circular economy. Although the use of AI in this list is aimed at business-as-usual companies, the ability to use AI to redesign products according to circular economy design principles and reduce waste has the potential to become far more appealing to a wider range of companies.
1 — Prototyping & Product Design
2 — Visualize Try-Ons via Virtual Avatars
These virtual fashion gurus are transforming browsers into buyers with impeccable style recommendations tailored to individual tastes and preferences, highlighting the role of AI in the fashion industry.
AI stylists are now accessible to all and are no longer a luxury for the few. This offers personalised online shopping like what celebrities and fashion elites used to have exclusively. With just a few clicks, these AI experts provide personalised outfit choices, making every shopper feel like they’ve got a personal stylist in their pocket. This is a prime example of how AI in the clothing industry and AI in the textile industry are making significant impacts.
The website Flyfish has, quite rightly, outlined the challenges e-commerce fashion sites should consider:
(a) Sensitive Data Handling: AI stylists rely heavily on personal data to curate fashion recommendations, raising concerns about how this information is collected, used, and stored.
(b) Privacy Policies: Ensuring that robust privacy policies are in place is crucial to protect consumer data and maintain trust.
(c ) Complexity of Style Matching: Decoding individual style preferences accurately remains a complex task for AI, often leading to mismatches.
(d) Continuous Learning: AI stylists must continually learn from user interactions to improve the relevance of their suggestions, which can be a time-intensive process.
(e) User Skepticism: Convincing users to trust AI with their style choices requires overcoming scepticism about machine-based fashion advice.
(f) Ease of Use: The success of AI stylists hinges on creating user-friendly interfaces that encourage adoption among less tech-savvy shoppers.
Problem: Apparel accounts for 23% of online retail sales in the United States. It also has the highest rate of returns, with 26% of clothing, 19% of bags & accessories, and 18% of shoes returned.
In 2023, 81% of retailers of eCommerce apparel (clothing, shoes, bags & accessories) tackled the cost of high return rates with restrictive return policies and return fees. But as retail has experienced in general, charging for returns has lowered return rates at the expense of losing business. Many retailers (41%) are rescinding their stricter policies in 2024 and rethinking how to manage returns more effectively.
Sarah Needham from the Centre for Sustainable Fashion at the University of the Arts London says the flow of goods to customers and back to retailers is flawed both from an economic and environmental perspective.
“We know that many of the products that are returned end up in landfill before we even use them which only adds to the vast amounts of used items already ending up in landfill… These products use precious resources which are becoming scarce and we are throwing them away unnecessarily,” says Needham.
3 — Optimise Pricing & Inventory
There is a delicate balance between having enough inventory to keep operations smooth and efficient while avoiding excess stock that ties up precious capital. Handling this job demands anticipation and strategy, often turning urgent calls into calmly managed solutions. Without effective inventory management, inefficiencies can result and cause significant financial losses.
Problem: A significant line item for many small businesses, inventory expenses can quickly eat away at profits and leave companies holding the bag on excess, spoiled, or obsolete products. Whether those goods are used to make final products, sold directly to customers, or a little of both, they have to be managed properly to avoid losing money and creating excess waste.
Effective inventory management helps companies operate more sustainably, better utilise limited physical space, and reduce storage costs. It’s all about striking a balance between the amount of product in stock and what your customers are going to need within a specified period of time.
4 — AI and Data for Materials Recover
The most well-known element of a circular business model involves minimising the use of virgin materials as a percentage of a product’s total materials. Beyond reducing carbon emissions, the use of more recycled materials helps companies increase “materials security,” which is particularly concerning for industries reliant on rare minerals such as lithium and cobalt. Increasing recycled materials is also a key solution for reducing carbon intensity in hard-to-abate industries like cement and steel. However, Joy Chen and Per Anders Enkvist from McKinsey highlighted that the availability of recycled materials is currently limited, and sometimes more expensive than virgin materials. Technological enhancements to increase the availability of high-quality recycled materials and reduce costs therefore are huge opportunities.
Solution: Opaque supply chains represent significant barriers to understanding the breakdown of materials at end-of-life for recovery and sorting. Maria McClay, from Google, explained how in 2019 Google piloted a solution to use machine learning and analytics to provide a more comprehensive view of impact along the textile value chain, and in 2021 was able to expand the offering to other brands. Another solution described by Hari Nair from Procter & Gamble is the HolyGrail project, which uses digital watermarks in products to make the sorting of recyclables easier at the end of life.
Conclusion
All too often we encourage new business models as part of the transformative power of the circular economy. Given the complexity of the industrial world we live in, perhaps the shorter route will be to demonstrate how AI can dramatically reduce waste, enhance energy and internal operational efficiencies and improve the sorting and reprocessing outcomes for end-of-use-cycle items.
The circular economy is not well known or understood. From start-ups to big businesses AI will become increasingly embedded into our daily lives. Some companies may unwittingly become circular as climate change and resource scarcity drive AI adoption for commercial survival. Maybe business-as-usual companies may not end up being so bad after all?
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Ms Adrienna Zsakay is the Founder and CEO of Circular Economy Asia Inc., and this article represents her opinions on the circular economy. Circular World Pick of the Week is brought to you by Circular World™ Media — a brand owned by Circular Economy Asia Inc.
For all the best content, join one of the fastest-growing circular economy groups on LinkedIn — Circular Economy Asia.
References
‘7 Ways to Boost Growth with Gen AI for Business’ by Next Gen Invent
‘From convenience to consequence: the facts of e-commerce and packaging waste’ published by OceanSix, 03 August 2023
’20 sustainable packaging solutions, developed with AI’ by Juliana Gómez, Flávia Fernandes, Welyn Goh and Nico Almanzar, published by the Board of Innovation
‘Fashion E-commerce: Personalized Shopping with AI’ by Bharath Venkatesh, published by Flyfish, 10 May 2024
‘Online Fashion Retailers’ Guide to Reducing Returns in 2024' published by Radial, 29 February 2024
‘Your brand new returns end up in landfill’ by Harriet Constable, published by BBC Earth
‘AI in inventory management: Redefining inventory control for the digital age’ by Akash Takyar, published by Leeway Hertz
‘7 Ways To Minimize Inventory Waste’ published by Forbes, updated 21 April 2021
‘How AI Will Accelerate the Circular Economy’ by Shirley Lu and George Serafeim, published by Harvard Business Review, 12 June 2023
‘Raising the Bar on Recycling: HolyGrail 2.0’ published by Proctor & Gamble, 21 April 2023
Originally published at https://www.linkedin.com.