Hi folks! I’m taking a new direction again today and focusing on sustainable consumerism, starting with the idea of the sharing economy, what it is, how it works and why it might be considered sustainable. This article is the first of a couple (plus some short ones) on the topic – feel free to comment and enjoy!
What is the sharing economy?
The sharing economy characterises consumption patterns centred around sharing with and borrowing from others. Over the last 10 years, its popularity has rocketed, particularly across America and the Western world (Frenken, 2017). This is not to say that sharing only occurs in certain parts of the world: sharing is part of human nature, and has been around since the dawn of our species. But the sharing economy puts a modern, Internet-based and somewhat money-oriented (depending on how you do it) spin on the activity. Defined as “an economic system based on sharing underused assets or services for free or for a fee, directly from individuals” (Botsman, 2015), the sharing economy depends on the offering of under-utilised goods and services, which have “excess capacity” as they are not used all the time, to others (Frenken, 2017). Examples of this include homesharing (e.g. Airbnb), renting of tool, equipment and clothes (e.g. Neighborgoods) or carsharing (e.g. Blablacar in Europe).
“The sharing economy occurs at the exact intersection of three trends: consumer to consumer interaction, access rather than ownership and the better use of under-utilised physical assets” – Frenken, 2017
It generally has a very positive reputation in terms of sustainability, as it theoretically reduces the need to purchase new goods or construct new facilities (Frenken & Schor, 2019): for example, staying in existing homes reduces the need to construct new hotels, in the same way that toolsharing reduces new purchases of tools (Schor, 2016). But what motivates people to share their possessions (and even homes) with strangers? And are there any hidden limitations to this new way of interacting with others? This post will address these questions using recent research on the topic.
Why be part of the sharing economy?
The sharing economy is supported for a number of reasons. A study by Hamari et al. (2016) looked at the motives behind participating in online-based collaborative consumption (CC) (a large sub-division of the sharing economy) by looking at survey responses from a sample of 168 people who used the sharing service “Sharetribe”. They found that participation in collaborative consumption is anticipated as being highly ecologically sustainable, but that a combination of intrinsic and extrinsic values and beliefs determine participation. These intrinsic motivations, such as the desire to “do good” and enjoyment of the activity, greatly affect motivation to be part of the sharing economy, but extrinsic factors such as the economic benefits of participating are a stronger determinant of actual participation (Hamari et al., 2016).
“Perceived sustainability is an important factor in the formation of positive attitudes towards CC, but economic benefits are a stronger motivator for intentions to participate in CC.” – Hamari et al. 2016
Generally, motivations for being part of the sharing economy derive from intrinsic values and extrinsic benefits: though many people take part because of the social connection they derive from interacting with new people. This is emphasised with the advent of Internet platforms, which has allowed the spread of “stranger sharing”: sharing your details with another person online allows the building of trust between participants of an exchange, making the group of people you are willing to share with, which traditionally would be limited to friends and family, much larger (Frenken, 2017).
“Participation on collaborative consumption communities and services is generally characterised as driven by obligation to do good for other people and the environment” – Hamari et al. 2016
What are the environmental impacts associated with the sharing economy?
When the sharing economy operates within communities on a peer-to-peer level, it can be an excellent way to improve community spirit. For example, the sharing economy has encouraged a revival of non-monetised transactions such as tool libraries, which enhances community trust and cohesion (Schor, 2016). However, the perceived environmental benefits remain arguably the most celebrated aspect of the sharing economy. In theory, sharing permits consumers to avoid the purchasing of new goods and services: this may not sound like much, but when considering the full life cycle of a product such as the making of its component parts, its usage, waste production and disposal, it could be quite significant. The total number of goods could be significantly reduced, with no impact on consumer welfare, as access is not affected (Frenken, 2017). As well as this, sharing provides a more resilient way of getting goods and services to people in times of rare peaks in demand, which may occur because of large events such as The Olympic Games, or with natural disasters (Frenken, 2017). Sharing goods and services would allow people access to important supplies even when there are few available.
“If fewer goods are needed, societies can achieve a reduction in energy use and greenhouse gas (GHG) emissions associated with the production and demolition of goods.” – Frenken, 2017
Carsharing on the other hand is a mixed bag when it comes to environmental impacts. The European ridesharing platform Blablacar claimed that because its service increased the average number of passengers per car (from 1.7 per vehicle to 2.8 per vehicle), it saved 1,000,000 tons of CO2 between 2013-2015 (Frenken, 2017). However, the company did not release the methodology used to calculate this figure, nor has it since been recalculated by a non-biased source. In addition, the expansion of access to cars, and the more frequent use of cars standing idle (as is the main point of the sharing economy) means that carsharing on a large scale might instead increase emissions (Schor, 2016). It is also important to consider the “ripple effects” of the sharing economy: that is, what would a homesharer do with the money they have earned through sharing their home? They may spend their money on travelling abroad (thus releasing large amounts of greenhouse gas emissions) or buying high-impact products such as new cars (Schor, 2016). These effects are not limited to the sharing economy only but are something to consider even though almost impossible to quantify.
Limitations of the sharing economy
Aside from a lack of data on the environmental repercussions of the growth of the sharing economy, several limitations to the process still remain. Firstly, there is an inherent risk in sharing your details with a stranger online, even for the purpose of generating trust between participants of the transaction. Giving your details to another person also permits rejection on account of the profile you provide for yourself, which can isolate some people and is a key disadvantage to the system (Richardson, 2015). For example, racial discrimination has been recorded on the homesharing platform Airbnb, where non-black hosts were able to charge an average 12% more for their property compared to black hosts with comparable properties (Schor, 2016).
“Whilst offering an antidote to the narrative of economy as engendering isolation and separation, the sharing economy simultaneously masks new forms of inequality and polarisations of ownership.” – Richardson, 2015
Another obvious disadvantage to an economy based on internet services is inequality in access to Wi-fi and the technology required to take part. The ongoing digital divide around the world means that at present, the sharing economy is limited to westernised countries and individuals with access to the infrastructure required to take part (Richardson, 2015). This is not to say that sharing goods informally does not happen everywhere, as it absolutely does, but more that the use of online platforms and websites such as Airbnb, Justpark and Skillshare is limited (Frenken & Schor, 2019). Concerns have also been raised about monetising the idle capacity of goods and services: where lending and borrowing things from friends and family was free in the past, some people may feel more obliged to either charge members of their immediate network for the same products and services (!) or instead lend to strangers who they know they generate money from. This may sound ridiculous, but research by Frenken and Schor (2019) reported homesharers reluctant to have family stay, because of the financial loss they would incur through not having strangers pay to stay instead!
A final limitation to note is the potential for monopolising of online sharing platforms, as has occurred with search engines and social media sites (Frenken & Schor, 2019). This would allow prices to be dictated by a few large companies, and remove peer-to-peer community cohesion from the equation, replacing it with the more capitalistic aim of maximising profit. However, it is difficult to say whether this will happen in the future, particularly because community-based projects are community-specific, with the critical mass required to set up a successful initiative much lower, generating scope for a range of initiatives (Frenken & Schor, 2019).
The sharing economy is a relatively new form of interacting with people to access goods and services. Done on a local level, with the priority being the provision of product or service access to people, the sharing economy can be sustainable. At its core, it is driven by the desire to do good for others, and the innate belief that sharing with others improves their wellbeing as well as your own. However, when the generation of profit becomes the main motivation for sharing it is difficult to control the environmental consequences and ensure equal access to everyone across society. As a result, and with almost everything, the sustainability of your actions in terms of environment and society depends greatly on the actions themselves, and on the scale of the actions. The sharing economy could be a successful way of encouraging community action and social interaction with new people, if it is based on its initial motivations: providing access to other people and improving welfare.
Botsman, R. (2015) Defining the sharing economy: what is collaborative consumption – and what isn’t? [online] Available at: https://www.fastcompany.com/3046119/defining-the-sharing-economy-what-is-collaborative-consumption-and-what-isnt (Accessed: 30/03/2020)
Frenken, K. (2017) Political economies and environmental futures for the sharing economy. Philosophical Transactions of the Royal Society A: Mathematical, Physical and Engineering Sciences, 375(2095), p.20160367.
Frenken, K. & Schor, J. (2019) Putting the sharing economy into perspective. In A Research Agenda for Sustainable Consumption Governance. Edward Elgar Publishing.
Hamari, J., Sjöklint, M. & Ukkonen, A. (2016) The sharing economy: Why people participate in collaborative consumption. Journal of the association for information science and technology, 67(9), pp.2047-2059.
Richardson, L. (2015) Performing the sharing economy. Geoforum, 67, pp.121-129.
Schor, J. (2016) Debating the sharing economy. Journal of Self-Governance and Management Economics, 4(3), pp.7-22