What a Sharing Economy Is and How to Make it Sustainable

Will the sharing economy benefit society? The answer depends on all of us.

Dr Oksana Gerwe (Brunel Business School) and Dr. Rosario Silva (IE University) report on their recent review, Clarifying the Sharing Economy.

The last decade has seen an explosive rise of companies that have come to be jointly known as the sharing economy. You have likely participated in the sharing economy as a user: e.g., staying at an AirBnB property, sharing a ride via Blablacar or Lyft, or getting help with an errand through TaskRabbit. You may also work for a sharing economy business as a service provider or interact with the sharing economy as business-to-business.

And, you may have questions about the sharing economy. What does its growth mean for sustainability? How can you influence it positively?

Our research examines the scope and impact of the sharing economy. We have reviewed existing studies and traced the evolution of key players since their founding (for example, Airbnb in 2008, Uber in 2009). Here, we describe what the sharing economy means for business sustainability. Overall, even though there’s potential for sustainability, it will only be achieved by the action of all the stakeholders in the sharing economy, including regulators, platforms, suppliers and users.

What the Sharing Economy Is

The sharing economy has already disrupted many traditional industries and is expected to grow further. Sharing economy companies have four common features:

1.     They are digital platforms enabling offline transactions between users

2.     They facilitate peer-to-peer transactions, where both the suppliers and the consumers are mostly, ordinary citizens or micro-entrepreneurs, not large business or companies

3.     They emphasize temporary access rather than ownership.

4.     They enable access to underused physical or human capacity (an empty room, a parked car or empty seat, a BBQ, someone’s skills, talents or time).

Blablacar is a good example of a sharing economy firm. It operates as an online platform and an app. But its transactions – shared rides – take place offline. The platform itself does not own cars but connects individual drivers and passengers who need to go to the same destination (peer-to-peer) and are willing to share a vacant seat in the car (underused capacity).

Today, platforms provide short-term access to properties (Airbnb, Homeaway, LoveHomeSwap, Couchsurfing) or products (Peerby); car-sharing (Turo, Getaround); ride-hailing (Lyft); crowd-shipping (Piggybee); tutorials (SuperProf); or other types of services (TaskRabbit).

Some of these companies are already global and publicly traded, such as Uber and Lyft, or will go public in the near future, such as Airbnb. By 2025, the sharing economy within Europe is projected to grow to €80 billion in revenues, up from €4 billion in 2015). In China, the government wants the sharing economy to represent 10 per cent of national GDP by 2020.

Is the Sharing Economy Sustainable?

Sustainability issues were an original driver of the sharing economy. (Other contributors were technology development, population growth and urbanization, and the economic crisis of 2007-2008.)

The sharing economy promised:

• Economic and social benefits. Suppliers of services could make additional income. Consumers benefit from better prices, wider choices and greater convenience.

• Environmental benefits: Sharing platforms rely on underused assets. Advocates often point to a household drill and a car: each spend about 95 percent of their working life idle in a drawer or parking space. Increasing access to these assets improves efficiency and saves resources.

Yet the actual sustainability impact of the sharing economy remains complicated and research is still limited. Some have argued that, a decade into its existence, the sharing economy has become more about convenience and efficiency than community and sustainability.

Many are concerned that firms are merely using the rhetoric of sharing to attract customers — while squeezing peer providers and/or customers and pursuing profit maximization for the platform owners. Similarly, greater accessibility and affordability of goods and services via a sharing economy may increase, not reduce, excessive consumption and waste creation, report researcher Cristiano Codagnone and colleagues.

Sometimes, the positive outcomes of the sharing economy services can be somewhat unexpected. For example, the entry of UberX in California resulted in a drop in alcohol-related vehicle fatalities, according to research by Brad Greenwood and Sunil Wattal. The negative consequences of the sharing economy may be easier to notice. For example, Uber and other on-demand ride services may be increasing, not reducing traffic congestion, reports researcher Mary Sutherland. Airbnb may exacerbate affordable housing shortages in some cities, finds Dayne Lee.

Your Role in Driving Sustainability

Overall, sustainability benefits of the sharing economy can only be realized through cooperation of all the participants of the sharing ecosystems, including regulators, platform owners and managers, peer suppliers of services, and consumers. Here are some things you can do.

If you’re a platform owner or manager: Embrace sustainability not as a marketing slogan but as a performance objective. Research shows that many individual suppliers and consumers value non-economic benefits of the sharing economy, such as social benefits and sustainability, as well as monetary opportunities (Bellotti et al., 2015; Lampinen and Cheshire, 2016). Thus, focusing entirely on economic benefits and overlooking individuals’ other motives is a missed opportunity for a sharing platform to appeal to and create value for sustainability-conscious individuals.

If you’re an individual service provider or consumer: You can have impact through your consumption choices and environmental awareness. As consumers, we make a small contribution to local sustainability every time we choose to borrow or rent an item via a sharing economy platform rather than buy one. The same is true when, as a supplier, we share an asset rather than leave it idle at home. Similarly, both consumers and suppliers can select those sharing platforms that pursue sustainability objectives alongside economic ones. In particular, choose support local grassroot initiatives in the sharing economy that try to optimize use of existing resources without the need for bigger output and expenditures.

If you are a regulator or policymaker: Champion regulation and taxation that support those sharing firms whose activities advance economic and environmental sustainability.

Distinguishing Good and Bad Actors

It is often difficult to distinguish between good and bad actors in the sharing economy: to identify good and questionable company policies and management strategies. A good starting point for regulators and others to evaluate platforms’ responsibility is to look at the overall fairness of their practices. Are they paying taxes? Bending rules? For better understanding of business practices in sharing firms, regulators should push for transparency and maximum openness by the sharing companies, paying attention to whistleblowing by the employees and participants.

Sharing activities that are proving unsustainable should then receive more scrutiny and regulatory pressure. Bike- and scooter-sharing companies are a good example, as they discard millions of damaged vehicles into vast scrap yards and bicycle graveyards.

It’s Up to Us All

Ultimately, the sustainability promises of the sharing economy will only be fulfilled when and if all the stakeholders in the sharing economy ecosystem keep each other accountable on the society, business and individual level.

Read the Research

Gerwe, O. and Silva, R., 2018. Clarifying the sharing economy: Conceptualization, typology, antecedents, and effects. Academy of Management Perspectives.About the Authors

About the Authors

Dr Oksana Gerwe is the Deputy Director of the MBA Programme at Brunel Business School in the UK and teaches at the Division of Globalisation, Entrepreneurship, and Strategy. Oksana holds a PhD in Business Management with a specialisation in Strategy from IE Business School, Madrid.

Oksana’s teaching and research focus on Competitive and Corporate Strategy, Innovation and Entrepreneurship. Her research and intellectual interests range from the sharing economy to peer-to-peer business models to disruptive innovation. “Disruptive innovation and the advancement of the Sharing Economy continue to radically change the world around us and the competitive landscape across multiple industries. I like to use my research to inform the students about these relevant and cutting-edge issues.”

Dr. Rosario Silva is Professor of Strategy at IE Business School–IE University, where she teaches the Competitive Strategy and Strategy courses in different master programs. She holds a PhD from the Carlos III University of Madrid. Throughout her career, she has taught in-company courses for more than twenty companies belonging to different sectors. Her current research focuses on issues related to the sharing economy, such as, for instance, the determinants of its growth or the response of incumbents to the entry of sharing economy platforms.