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How sharing promotes sustainability

Capitalism in crisis paving the way for sharing and collaboration

Capitalism has been largely criticized for recent financial, social and environmental crises. (Porter & Kramer 2011, Heinrichs 2013, etc.). Porter and Kramer (2011) argue that despite is shortcomings, capitalism is an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs, and building wealth. During the global financial and economic crisis of the past five years, alternative perspectives on capitalism and consumerism have been voiced. Between the poles of “repairing” and improving regulation of the existing “system” and radical alternatives to a capitalist market society, a third perspective has gained attention. The concept and practice of a “sharing economy” and “collaborative consumption” suggest making use of market intelligence to foster a more collaborative and sustainable society. Heinrichs (2013) strongly believes that the sharing economy is a global phenomenon with remarkable dynamics, not just hype.

At the same time, alternative approaches rise. Jeremy Rifkin (2014) argues that during the past 10 years, the growth of the NGO sector in the US has doubled economic growth and NGOs are currently employing over 10% of the work force in US, UK and Canada. Instead of for-profit value creation, a more collaborative mindset is emerging.

The past three decades have witnessed an erosion of the categorical divide between profit-based and non-profit enterprise, as various types of businesses have emerged that embody characteristics of both. Grassl (2011) among others argues that there is a wide operating space for hybrid organizations between the current non-profit and the for-profit dichotomy as also suggested by the notions of shared value (Porter & Kramer), Base of the pyramid businesses (Prahalad), the B-Corps movement; and in fact many examples of the collaborative or sharing economy.

What is the sharing economy?

The collaborative economy builds on distributed networks of connected individuals and communities. The rise of new forms of consumption is not constrained to individual actions of buying goods to satisfy needs, but includes collaborative consumption, focusing on: products as services; redistribution markets; and collaborative life-styles (Botsman; Rogers, 2010). Solutions for the shared use of goods exist in the private (C2C/P2P), public (public sector-to-consumer) and the commercial (B2C) spheres. The current growth of the collaborative economy is due to the emergence of new urban lifestyles, and more importantly, the development of digital platforms that enable new forms of collaboration, as well as the development of professional skills and services that allow the replication of individual collaborative solutions.

The internet makes it cheaper and easier than ever to aggregate supply and demand. The advancement and dissemination of ICTs made possible new forms of sharing, and the ascension of platforms for collective practices that allow interaction, free access to information, knowledge exchange, creation and collaboration. Friedman (2005) affirms that competition and collaboration at global scale, among individuals and companies, are now cheaper, easier, less conflictive, more productive, and reaching an ever increasing number of people. According to Friedman (2005), in the 2000’s a global playing field was created and, articulated through the web, made different forms of collaboration viable, meaning the sharing of knowledge and work at global scale.

Owyang (2014) has split the collaborative economy into six distinct areas or spheres in his visual work in the following picture. Collaborative consumption currently includes prominently such areas as transportation, food, services, goods, money and space. He identifies the key forces shaping the development to be either societal, such as the desire to connect or the sustainability mindset, economic such as the financial climate or technology enablers such as the internet and mobile technologies. Botsman (2014) on the other hand sees the collaborative economy to be thriving based on five key problems of redundancy, broken trust, limited access, waste and complexity.

Figure 1. Dimensions and elements of the sharing economy. (Owyang)

The sharing economy is characterized by an explosion of practices such as carsharing, ridesharing, cooperatives, community farms, shared housing, shared workspaces, and a multitude of new micro-enterprises made possible by platforms that connect supply and demand at the peer-to-peer level. Examples of prominent companies operating in the sharing economy are Airbnb, Lyft, Sidecar, TaskRabbit and Uber.

While its definitions are varied and parameters continue to evolve, activities and models within the collaborative economy enable access instead of ownership, encourage decentralized networks over centralized institutions, and unlock wealth. They make use of idle assets and create new marketplaces. In doing so, many also challenge traditional ways of doing business, rules, and regulation.

There are only few studies of how much people are using the collaborative economy. In Germany research reveals that more than 50 percent of consumers have experience with some form of sharing economy, and that approximately 25 percent can be described as “socio-innovative co-consumers” (Heinrichs and Grunenberg 2013). Another study by VisionCritical demonstrates that 40% of the adults population in the US and 52% in the UK have used sharing economy enabled platforms to access goods, services, transportation, money or space from other consumers instead of going through traditional means (Owyang et. al. 2014). A supply-side focus suggests there has also been a dynamic increase in sharing models concerning cars, bikes, rooms, food, gadgets, etc. Similar observations can be made for product service systems within business and between businesses and consumers or redistribution markets, including upcycling and other ways of finding new uses for old things.

The growth of sharing

Due to its wide applicability, the potential of the sharing economy is substantial. In fact, the market is surpassing any other markets in outlook and market growth. Recent estimates by Forbes place the sharing economy at 3,5 billion USD in 2013 with a market growth rate of over 25% (Forbes 2013, Dervojeda et. al. 2013). At this rate, peer-to-peer sharing is transforming from an income boost into a disruptive economic force. The sharing economy is being called next big trend in social commerce, and represents what some analysts say is a potential $110 billion market (Contreras 2011).

AirBnb, perhaps one of the most raved examples of the collaborative economy, sees over 12 million annual guests staying on 34,000 cities globally (Riley 2014). Airbnb is forecasted to grow to 100 million nights per year, a figure that would likely produce revenue of more than $1 billion, up from an estimated 150 USD million in 2012 and 250 million USD in 2013. Currently, according to the Wall Street Journal, Airbnb has a $10 billion valuation, meaning it is valued at more than some of the hotel chains it is increasingly competing against. (Wall Street Journal 2014). Although this is only an example, it demonstrates the immense potential for the collaborative economy to disrupt traditional industries and force the companies in those industries to rethink their business logic.

How sharing promotes sustainability

Production and consumption seem to be converging where social and environmental problems are in focus. There is a strong trend demonstrating that access is being more valued than ownership, especially when it comes to commodities such as cars for example (Birdsall 2014, Kelly 2009). The sharing economy has the potential to provide a new pathway towards sustainability as a long-term goal (Heinrichs 2013).

The sharing economy and collaborative consumption can neither bring about sustainability by themselves. However, they may be a significant element in facilitating a new pathway towards sustainability. Collaborative systems can, in fact, be more environmentally friendly by increasing usage efficiency, reducing waste, incentivizing better products, and by absorbing the excess of production and consumption. These lead to declines in CO2 levels, noise and traffic congestion and natural resource savings through product life-cycle extensions and decreases in food wastage for example (Dlugosz 2014, p.39). Yannopoulou et. al. (2013) find references to a strong sustainability discourse and inter-personal exchange in collaborative consumption experiences such as Couchsurfing and Airbnb.

The sharing economy makes fuller use of idle resources, allows decentralized production and consumption systems and provides an outlet for surplus or under-utilized personal goods. It has also been demonstrated to bring about social benefits through engagement, building trust and enhancing community values and cohesion for example. For a great number of people, the sharing economy provides an additional source of income, sometimes even substantial. The sharing economy brings people and their work back together through sharing, gifting, bartering, and peer-to-peer buying and selling. It thus has deep implications for how cities design urban spaces, create jobs, reduce crime, manage transportation, and provide for citizens. There are clear indications that sharing can contribute to sustainability both environmentally, socially and economically, however, it is unsure whether the scale is sufficient considering the global challenges faced today.

Conclusion and outlook

The sharing economy seems to bring about substantial benefits socially, environmentally and also economically. Undoubtedly it also raises many questions, which relate to public policy, urban planning, fairness and safety for example. However, we believe that fostering the growth of the sharing economy is worthwhile and something that merits further studies to see whether it can be used to boost prosperity and resilience in times of economic crisis and climate change. Cities could act as a platform for sharing and provide breeding ground for reaping the benefits of the collaborative economy. It is our intention to study the idea of the sharing city further to learn how cities could contribute to more resilient ways of providing housing, transportation, goods, food and jobs through promoting collaborative business models.

Author

Minna-Maari Harmaala, yliopettaja, Haaga-Helia ammattikorkeakoulu, minna-maari.harmaala@haaga-helia.fi

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Botsman, R. & Rogers, R. 2010. What’s mine is yours: the rise of collaborative consumption. New York, USA. HarperCollins.

Contreras, J. 2011. MIT Sloan grad on the “sharing economy,” the next big trend in social commerce. http://mitsloanexperts.mit.edu/mit-sloan-grad-on-the-sharing-economy-the-next-big-trend-in-social-commerce/

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