In recent months, the phenomenon known as “AI washing” has been drawing attention from media outlets worldwide. This term, coined by BBC News, is a play on “green washing,” where companies exaggerate their use of environmentally-friendly practices or products. AI washing involves businesses making overblown claims about their utilization of artificial intelligence technology in their products and services, potentially misleading customers and investors alike.
One high-profile example of AI washing is Amazon’s “Just Walk Out” technology, which allows customers at some Amazon Fresh and Amazon Go stores to pick items and leave without checking out. The system uses sensors to track purchases, automatically charging the customer. However, reports emerged earlier this year suggesting that approximately 1,000 workers in India were manually checking around 75% of transactions, raising questions about the extent of AI’s role in the process. Amazon denied these claims, maintaining that Indian workers were only reviewing the system.
There are several factors contributing to the rise of AI washing. One major contributor is competition for funding; companies strive to appear innovative and cutting-edge, often using the term “AI” in their pitches to attract investors. OpenOcean, a UK-based investment fund for new tech firms, reported that only 10% of start-ups mentioned using AI in their presentations in 2022; this number rose to over a quarter in 2023 and is expected to surpass one-third in the current year. However, as Sri Ayangar from OpenOcean notes, there is a significant gap between companies claiming to have AI capabilities and those that can demonstrate tangible results from their use of AI.
Another reason for the increase in AI washing is the lack of a standard definition for artificial intelligence. Douglas Dick, the UK head of emerging technology risk at KPMG, explains that asking a room of people for their definition of AI would likely result in multiple answers, as the term is used broadly and without clear reference points. This ambiguity enables businesses to make vague or misleading claims about their AI usage.
The consequences of AI washing can be severe for businesses, leading to overpaying for technology and services that do not meet expectations or failing to achieve operational objectives intended to be aided by AI solutions. For investors, it becomes more difficult to identify genuinely innovative companies, while consumers may develop skepticism towards products offering advanced AI-driven capabilities that ultimately underdeliver on their promises.
Regulators are starting to take notice of the issue, particularly in the United States. The Securities and Exchange Commission (SEC) recently charged two investment advisory firms with making false or misleading statements about their use of AI. In the UK, existing rules and laws already address AI washing, such as the Advertising Standards Authority’s (ASA) code of conduct, which mandates that marketing communications must not materially mislead or be likely to do so.
As artificial intelligence continues to make headlines and shape industries worldwide, it is crucial for businesses, investors, and consumers alike to remain vigilant in discerning the true capabilities of AI technology and avoid falling victim to AI washing.