The problems and potential of sustainability in the Sharing Economy

The Sharing Economy could be called the accidental revolution. When Brian Chesky and Joe Gebbia started renting out a spare air-bed in their apartment to make ends meet in early 2007, little did they know that they would go on to create one of the biggest new companies in the world with over 425k guests-per-night and become the example par-excellence of the new ‘alternative economy’. This economy has grown hand in hand with the internet revolution and thrived in the age of hyper-connectivity. Known by a plethora of different names (among others: collaborative consumption, shared ownership, upcycling, the circular/trust/peer-to-peer economy), the ‘Sharing Economy’ is now one of biggest and fastest growing economic trends in modern years and shows no signs of slowing down. In 2013, Forbes estimated rates of growth in this new peer-to-peer economy to be in excess 25% per year.[1] Developed and fed through interactions between consumers, the Sharing Economy can be best described as an economic system grounded in the sharing of human, physical and intellectual resources. The companies riding this wave (Lyft, Snapgoods, TaskRabbit, Feastly, Blabla Car, Spotify, Earbits and Uber to name a few) are changing the world and the way we do business. In particular, the Sharing Economy has been lauded as a key to a sustainable future, and some have even concluded that it is the inherently sustainable characteristic of these services that drives their popularity.[2] In the sharing economy, idle resources—a spare bed, an unused car, or even an unused power tool left in the garage—are re-allocated to those who need them. Defined by the notion that ‘access is the new ownership’ and powered by the connectivity of the Internet age, waste is reinvested and resources are maximised to their full potential. Things that would otherwise be wasted are shared, and the economy becomes a lot more circular. It’s not hard to make the leap of logic that the Sharing Economy is a self-fulling model of sustainability to be celebrated and a bandwagon to be hopped on.

However, when we shift our notion of sustainability beyond a limited resource-utilisation definition to one that encompasses all areas of the environmental, social and governance (ESG) spectrum, the yellow brick road of the Sharing Economy loses some of its lustre. True sustainability encompasses far more than the efficient use of resources, but needs to incorporate important considerations of social and economic issues. When we take into account these elements such as human/worker rights or the need to meet regulatory requirements, how does the Sharing Economy hold up as a model of sustainability? It turns out that the Sharing Economy harbors as many problems as it holds potential.

Taking Uber—perhaps one of the most successful Sharing Economy ventures—as an example is particularly illuminating. The role Uber plays in moving towards a more resource-friendly future (the limited sense of sustainability) is clear and inherent to their business strategy. The company have made it a major marketing point that in 2015 they have contributed to taking over 1 million cars off the road in New York City as people lose the need for private vehicles.[3] Yet the company has been plagued by scandals that seriously call into question its relationship with the other important aspects of sustainability. Uber has been highly criticised for its treatment of employee drivers after numerous protests were staged when drivers were dismissed with no warning due to low reviews or budget cuts.[4] The drivers are not ‘bona fide employees’, says Uber, and thus do not need be given the same rights and working conditions as regular office employees. Accusations of anti-competitiveness have also been recurrent, with Germany and other countries banning Uber due to the unfair competition they pose to the local taxi industry.[5] Institutions such as the Pennsylvania Public Utility Commission have raised other issues such as lack of safety measures and regulations that are applied to Uber rides.[6] These problems are not unique to Uber either, but occur across the wide spectrum of Sharing Economy companies. The restriction of methods for employees of the company TaskRabbit (the aptly named ‘TaskRabbits’) to contact each other has raised concerns over the denial of collective action amongst workers. In New York, the leftover sharing business Mealku has been subject to complaints by restaurants about the inherent lack of health or safety standards, and Airbnb has been embroiled in a legal battle over their refusal to pay taxes levied on hotels.[7] This cursory list gives only the tip of the iceberg in difficulties being faced by the infant Sharing Economy in terms of their environmental, social and governance issues. What is becoming clear is that these are not random occurrences. These issues are a telling symptom of the inherent problems the Sharing Economy faces in managing the issues most intrinsic and vital to creating a truly sustainable economy.

So why are sustainability issues getting left behind as this new economy thrives? While the notion of sustainable business is a component of the sharing economy, it is clearly not its defining factor. In their discussion of the nature of the Sharing Economy, Hamari, Sjöklint and Ukkon have argued that sustainability is only a concern and motivation for a portion of those in the Sharing Economy, instead emphasising that most participants are choosing to participate due to its financial and social benefits, i.e. access to extra cash and new opportunities to meet people.[8] It is also worth recognising that in this new peer-to-peer model, the Sharing Economy is directed by and for people. It is an economy where the consumers are often the decision makers; they make up the vendors, employers and the employees in this new set-up. The normal top-down rules that govern the traditional economy to aid environmental, social and governance risk such as regulations and reporting requirements have not yet gained any real traction. In the simplest terms, the Sharing Economy is only as interested in sustainability as its consumers are. Often—and especially in terms of wider social and governance issues—this is not at all. This is not a huge surprise. People trying to rent out their power tools on weekends or help confused neighbours set up their latest Ikea furniture for a few extra dollars are not generally considering their material issues in the process. Without a structural or regulatory system that has advanced itself to ensure that basic environmental, social and governance requirements are met in this new system, it is easy for companies in the Sharing Economy to remain out of the spotlight. Without these considerations being addressed, the Sharing Economy ends up looking a lot more like an obstacle than a key to a sustainable future.

It would be wrong to look at the Sharing Economy as a missed opportunity, a path to a sustainable future that took a wrong turn and ended up going back on itself. The potential for environmental sustainability in the Sharing Economy is a great asset and something that needs to be championed. However it is clear that in this new ecosystem upending aged business models, a guiding hand needs to come in to shape its direction for the better. It is up to sustainability experts and governments as much as the companies themselves to step-up to this new challenge and find ways to make sustainability in its widest sense applicable to the new models and modes of consumption which often leave these considerations as an afterthought. As systems evolve, so does the need to remain aware of their limitations and move to correct them where necessary. If we can do this, the future is bright and perhaps the Sharing Economy can provide an easier road to a sustainable future.

References:

Farmer, A. (2012) Making reservations for leftovers. Available at: http://cityroom.blogs.nytimes.com/2012/11/23/leftovers-made-to-share-with-strangers/ (Accessed: 13 October 2016).

Geron, T. (2013) Airbnb and the unstoppable rise of the share economy. Available at: http://www.forbes.com/sites/tomiogeron/2013/01/23/airbnb-and-the-unstoppable-rise-of-the-share-economy/#46ee51506790 (Accessed: 13 October 2016).

Hamari, J., Sjöklint, M. and Ukkonen, A. (2015) ‘The sharing economy: Why people participate in collaborative consumption’, Journal of the Association for Information Science and Technology, , pp. 2047–2059. doi: 10.1002/asi.23552.

Huet, E. (2014) How Uber’s shady firing policy could backfire on the company. Available at: http://www.forbes.com/sites/ellenhuet/2014/10/30/uber-driver-firing-policy/#7ebaa37e8ef7 (Accessed: 13 October 2016).

Lieber, R. (2013) A $2,400 Fine for an Airbnb Host. Available at: http://bucks.blogs.nytimes.com/2013/05/21/a-2400-fine-for-an-airbnb-host/ (Accessed: 13 October 2016).

Nath, J. (2014) PUC issues cease and desist orders for Uber, Lyft. Available at: http://wesa.fm/post/puc-issues-cease-and-desist-orders-uber-lyft#stream/0 (Accessed: 14 October 2016).

Prothero, A., Dobscha, S., Freund, J., Kilbourne, W.E., Luchs, M.G., Ozanne, L.K. and Thøgersen, J. (2011) ‘Sustainable consumption: Opportunities for consumer research and public policy’, Journal of Public Policy & Marketing, 30(1), pp. 31–38. doi: 10.1509/jppm.30.1.31.

Sacks, D. (2015) The Sharing Economy. Available at: https://www.fastcompany.com/1747551/sharing-economy (Accessed: 13 October 2016).

Scott, M. and Eddy, M. (2014) German Court bans Uber service nationwide. Available at: http://bits.blogs.nytimes.com/2014/09/02/uber-banned-across-germany-by-frankfurt-court/? php=true& type=blogs (Accessed: 13 October 2016).

Uber Newsroom (2015) ‘Taking 1 Million cars off the road in New York city’, 10 July. Available at: https://newsroom.uber.com/us-new-york/taking-1-million-cars-off-the-road-in-new-york-city/ (Accessed: 13 October 2016)

[1] (Geron, 2014)

[2] (Prothero et al., 2011), (Sacks 2011).

[3] (Uber Newsroom 2015)

[4] (Huet 2014)

[5] (Scott and Eddy, 2014)

[6] (Nath 2014)

[7] (Farmer 2012); (Lieber 2013)

[8] (Hamari et al. 2015): 2047.