Written by Lukas Adamski and Victoria Portela with collaboration in findings from Madison Doring and Bhagyrashree More.
The fast fashion industry, driven by persistent consumer demand for affordable and trendy apparel, operates in a competitive landscape with rapid shifts in consumer trends. Weekly production and distribution of new products are common practices, often prioritizing cost-efficiency over environmental and social considerations. Artificial Intelligence (AI), particularly the Behavioral Foundation Model (BFM), emerges as a crucial tool to alleviate the adverse environmental, social, and governance (ESG) impacts associated with the mismanagement and waste in the fast fashion sector, and concurrently mitigates financial losses. This paper delves into three key applications of the BFM in the fashion industry, specifically addressing returns management, weather volatilities, and overall corporate ESG strategy.
Historically, global brands prioritized cost reduction and typically outsourced production along with the responsibility for environmental and social issues to subcontractors in developing economies like Bangladesh and Vietnam (WTO 80). However, today’s fast fashion industry contributes enormously to global environmental issues. Therefore, it is imperative for brands to be accountable for concerns related to social and environmental sustainability. To elaborate, 8.8 percent of global carbon emissions are emitted by the fashion industry. At the same time, the fast fashion industry is responsible for 1.7 percent of the global GDP (Statista 3). This comparison highlights the carbon-intensive production and distribution process of the fashion industry. Environmental issues such as waste production, water pollution, and excessive water use are linked to this industry. Furthermore, the negative social impact of the fast fashion industry, known for poor working conditions and health and safety concerns, is often criticized. Fast fashion is also considered one of the most polluting industries (Dzhengiz et al.) — it is not only a contributor to climate change but will be affected by the physical and transitional risks of the climate crisis such as severe weather events or changing weather patterns (Oh et al.). Simultaneously, the evolving consumer inclination towards sustainable products is increasing (refer to Figure 1).