The (False) Promises of AI and On Demand Manufacturing towards Sustainability?

by: in Law
clothes on hangers

Mark Kawakami examines the complexities of the EU's Consumer Rights Directive (CRD) and its unintended environmental impacts 

The Problem

In the EU’s eternal quest to strengthen its internal market (and to enhance consumer protection along the way), it created the Consumer Rights Directive (CRD), which enabled consumers to return any online purchases within 14 days without justification. At the time of its promulgation, however, the EU underestimated the impact such a measure could have in hindering the achievement of their other goals, mainly, the European Green Deal and their objective to be climate neutral by 2050. 

To elaborate, the cooling-off period enshrined in Article 9 of the CRD has no doubt strengthened consumer confidence in making cross-border/online purchases. In doing so, however, it undeniably contributed to the 17 billion items that are returned annually by consumers worldwide. While this in and of itself may not seem like a problem, the process of returning items purchased online adds roughly 4.7 million metric tons of CO2 emissions, taking into consideration emissions related to transportation and warehousing. 

The fashion industry, “responsible for 10% of annual global carbon emissions”  has been a major culprit in this area, not only because of the returns, but because of fast fashion’s tendency to pump and dump an endless surplus of cheap clothing, with supply significantly outweighing the demands of the consumer. This inevitably leads to a rather undesirable situation, with 85% of clothing produced worldwide ending up (mostly unused) in landfills or disposed through burning, which significantly harms our collective efforts to fight impacts of climate change.

“On Demand” Fashion: The Solution?

While it is worth asking the question of whether the alleged benefits of offering consumers a cooling off period outweigh the (not so) hidden costs, a potential path out of this dilemma has emerged, as some would argue, through what is now being called “on demand fashion” or “on demand manufacturing”.

If you have not heard about on demand fashion, look no further than emerging platforms like SHEIN and TEMU that have skyrocketed in popularity with the consumers, due in large part to their extremely low prices. 

SHEIN, for example, is an online apparel retailer that offers “exclusive discounts” on “latest trends” that recorded more than $2 billion in profits in 2023 and roughly $45 billion in gross merchandise value. Turning a blind eye (for the moment) to the plethora of allegations made against them for their assortment of unethical practices (e.g. their ties to China, forced labor concerns, and IP theft just to mention a few), it is supposedly its innovative operation model (i.e. on demand fashion) that is driving its meteoric rise and unbelievable profitability.

So how does it work? There are several ingredients to their (not so) secret sauce, the biggest one being their integration of advanced information technology (thanks to the wonders of AI), which enables them to more efficiently match their supply with the demands of the customers. In other words, SHEIN can match vendors based in China to ship directly to customers in the US or the EU, eliminating in the process, the need for warehouses and other intermediaries (e.g. local distributors) that would otherwise add costs to the consumer. The gamification of their shopping experience and the ubiquitous – if not incessant – advertising likely contribute to their success as well, but that is for another article.

The proponents of on demand fashion believe that this process can not only reduce waste (i.e. by only manufacturing items that there is demand for) but also reduce CO2 emissions in a variety of ways (e.g. with less clothes being dumped into landfills and being burned for disposal). There are also arguments that claim that because the costs for clothes and other items sold on these platforms are so low, consumers do not go through the trouble of returning purchased goods (perhaps eliminating in the process the need for CRD Article 9?).

The Complicated Path Forward

Given the allure and the tantalizing promises of on demand fashion (or on demand manufacturing), other retailers are trying to get in on the profits. For example, Amazon recently patented an “on-demand apparel-manufacturing system that would let it make clothes only once orders have been placed.” Arguably, with the likes of Amazon emulating the on demand trend, it reduces some of the more specific concerns about this growing trend (i.e. potential entanglements with Chinese backed companies gaining so much influence in the global market and collecting so much consumer data in the process).

While the on demand model may be the path of the future, this is not necessarily the panacea that we are looking for as we are dealing with an extremely complicated set of societal problems. A solution to one problem – as was the case with CRD’s cooling off period – creates different kinds of problems (i.e. increased CO2 emissions) that we will subsequently have to address down the line.

Similarly, while transition from fast fashion to on demand fashion may potentially reduce waste and CO2 emissions, we cannot simply ignore the problems of labor exploitation or the shocking amount of energy consumed by its reliance on AI

With the US and European regulators likely intervening at some point in this area, they must take caution: Every law that they push forward must be assessed holistically and from multiple angles (much more so than they already do). We live in an interconnected, if not entangled, world. A measure that promotes sustainability can be detrimental to the protection of human rights. What can benefit the EU, can harm other nations. As the EU plans to churn out new laws aimed at the global reduction of forced labor or deforestation (which sounds harmless enough), it will become increasingly vital for lawyers to look at the impact of these measures (i.e. allegations of protectionism) from a more global, macro-perspective.