AI’s Role in Retail’s Climate Future
The widespread use of artificial intelligence (AI) is now a crucial tool in tackling climate change by reducing greenhouse gas emissions. Indeed, AI services in the retail sector are predicted to increase from $5 billion to above $31 billion by 2028.
However, we’re now at a serious inflection point, reaching multiple tipping points that will secure the future of our planet. Time is running out to tip the scales in our favor, so join us as we explore what is being applied to tackle climate change and the opportunities it has for future applications to help pave the way toward a more sustainable future for retail.
AI in Improving Retail Sustainability
AI is ever-agnostic and its applications are endless. From energy production management (where it reduces energy consumption and optimizes energy use) to transportation (enabling intelligent routing systems and reducing congestion), and from agriculture (via precision agriculture systems that help farmers reduce the use of fertilizers, pesticide and water) to waste management (identifying system inefficiencies and recyclable materials in waste), AI is already performing much-needed streamlining across many sectors and functions.
As it stands, the retail industry accounts for around 25% of global emissions, occurring across the value chain — and fashion alone is on track to release around 2.7 billion metric tons a year by 2030 if no abatement actions are taken. But the good news is that retail already uses AI to improve sustainability in many ways while increasing profits and optimizing business, and it’s only set to grow. In fact, the global Artificial Intelligence in retail size was valued at USD 3.75 billion in 2020 and is projected to grow to USD 31.18 billion by 2028, exhibiting a CAGR of 30.5% from 2021-2028.
From smart inventory management and sustainable sourcing to improved energy efficiency and waste reduction, AI has been transforming the retail industry’s emissions for a while now. With its ability to analyze large sets of data, retailers can make informed decisions, enhance customer experience and streamline their operations.
Crucial reduction paths that are still emerging, however, are using AI to:
- Reduce carbon emissions within the entire supply and value chain
- Provide real-time emissions data
- Enable product-level footprinting to customers.
For years, retailers have wanted the ability to hit these massive KPIs for the sake of the climate and their business, but have lacked the tools that can make a real difference.
However, at Vaayu, for example, our technology is the world’s first automated carbon software that is built to empower retailers to cut their carbon emissions in real-time and at scale. The platform works by leveraging proprietary AI and machine learning technology to draw insights from production, sales and logistics to provide retailers with actionable insights into their supply chain.
Vaayu has also developed the world’s first calculation model for product carbon footprinting (PCF) which has the potential to dramatically change consumer behavior by providing detailed information on the carbon life-cycle of individual products. There are no signs of the push for conscious consumerism slowing down, and the calls are coming from within. More than half (58%) of consumers are actively looking for ways to track their own carbon footprint while shopping.
Using Vaayu’s PCF calculation model that leverages our AI, retailers can identify reduction opportunities within the value chain while allowing consumers to make more sustainable choices in tandem. In action, this looks like our work with Klarna on their new carbon tracker that provides users with an enhanced breakdown of their carbon footprint across over 50 million fashion items. Since the tracker’s successful launch with Vaayu in 2022, Klarna’s 150 million global shoppers are receiving tangible insights into the environmental impact of their completed purchases, helping them make more thoughtful and sustainable shopping decisions.
In short, AI makes this all possible. Throughout all of these breakthroughs via our proprietary AI, we are empowering retail businesses to lower their emissions and collectively reduce 1 gigaton of carbon emissions by 2030.
Challenges and Limitations of AI in Retail
Although AI has immense potential to decelerate climate change, it also faces several challenges and limitations. One of the main challenges is the lack of data currently collected, as well as interoperability between different systems. AI algorithms require vast amounts of data to train and improve, and the lack of data in most cases can limit their effectiveness. Interoperability between different systems is also crucial to enable data-sharing and collaboration, but it can be challenging to achieve due to differences in standards and protocols.
Another significant limitation is the high cost of AI implementation and maintenance, which can be a barrier to adoption, especially for small and medium-sized businesses. The complex nature of AI algorithms and their integration with existing systems can also make it challenging to implement and maintain them.
The Future Direction of Using AI to Reduce Retail Emissions
Despite these challenges, the future of AI looks bright: AI still has immense potential to decelerate climate change by reducing greenhouse gas emissions at scale. By addressing the obstacles, we can harness the full potential of AI and accelerate the transition to a more sustainable future.
Ongoing research and development in AI and its nuanced fields such as data science and machine learning are likely to soon overcome some of AI’s current limitations. Partnerships between governments, industries, businesses and research institutions can also help accelerate the adoption and implementation of AI-powered systems.
It is crucial to continue investing in AI research and development, implementing AI solutions early on, to harness its full potential in decelerating climate change. To find out how AI could support the decarbonization of your business, get in touch.
