Honest Company notes risks from incorporating AI including generative and agentic systems, reliance on third-party platforms, and potential liabilities.
“In addition, we are increasingly incorporating artificial intelligence (“AI”) and data analytics into our operations. Our ability to compete effectively depends in part on our capacity to adopt these technologies in a timely and responsible manner. If we fail, or are perceived to have failed, to keep pace with competitors' use of AI to improve operating efficiencies, develop commercial insights, or anticipate consumer preferences, our competitive position, market share, and financial results could be adversely affected. The adoption of AI technologies (including generative AI and autonomous or "agentic" AI systems) also introduces operational risks. AI systems may produce inaccurate, biased, or unreliable outputs that could lead to, among other things, flawed business decisions, inefficient resource allocation, or errors in manufacturing, ordering, or fulfillment processes. We rely on third-party AI platforms and service providers, and disruptions, errors, security vulnerabilities or other issues in those systems could harm (including interrupt) our operations and otherwise expose us to liability. Additionally, the use of AI tools by our employees, contractors, service providers, or other third parties with whom we work may, among other things, inadvertently disclose confidential information, compromise trade secrets, or generate content that infringes third-party rights (including intellectual property). Outputs generated by AI tools could be inconsistent with our brand valu”