What does the spectacular rise of the sharing economy mean for the environment?

Over the past five years there’s been a lot of hype about the sharing economy. Hundreds of start-ups are popping up (many of which epically fail) providing opportunities to share everything from sofas to secrets. There’s still much debate about what the sharing economy actually is, and how it overlaps with similar concepts like collaborative consumption and the peer to peer economy. Then there’s the whole question of whether it’s really about sharing or not and whether it matters if it isn’t. In any case it’s clearly having a major impact on the economy, with poster children Uber and Airbnb respectively valued at $40 and $20 billion. Compare this to other internet companies like Twitter ($23 billion) and Instagram ($35 billion).

Where there hasn’t been a huge amount of attention is the environmental underbelly of this new economy, which is surprising given it represents an opportunity for a seismic shift in the way resources and products are used and disposed of. Why hasn’t this been seized upon?

Why multinationals aren’t playing
The sharing economy is disruptive, favouring small, new, nimble companies. None of the big players in the sharing economy derived from existing multinationals. Unsurprisingly, existing large companies embracing the circular economy as a way to cut their environmental footprint have largely been unable or unwilling to consider sharing economy business models. While this is less relevant for the ‘outer loops’ of recycling and remanufacturing, the ‘inner loop’ activities of reuse, rental and servitisation (providing a service like light rather than a lightbulb) are exactly what the sharing economy does best.

Many sharing economy companies use peer to peer exchange or rental business models, avoiding centralised distribution. For instance, in the case of servitisation, I could rent a lawnmower from an online company, which would require delivery logistics, and some forward thinking on my part, or I could see that it’s sunny outside, register my request online, and a few hours later wander down to borrow Jim’s at number 14. The latter allows me to be much more spontaneous, reduces transportation costs (and emissions) and is probably more convenient for me as a consumer, provided an easy online booking system is in place. Likewise, if I want to get rid of an old lawnmower, it’s much easier for me to put it on ebay or Freecycle than to think about trying to sell it back to the manufacturer.

Companies committed to reducing their environmental impact should seriously consider integrating these sorts of peer to peer models into their businesses, rather than trying to reinvent the wheel.

There’s no guarantee it’s good for the environment
Environmental NGOs haven’t had much to say on the topic either. It’s tempting to think the sharing economy is a simple positive story for resource efficiency and doesn’t otherwise demand much attention. While a boom in inner loop circular economy models is clearly a good thing, there is no guarantee that the sharing economy overall is a net gain for environment. It’s not hard to imagine Uber increasing road traffic at the expense of public transport, or clothes swapping sites increasing net consumption and, therefore, the demand on resources.

French think tank Institut du développement durable (IDDRI) has characterised the sustainability of the shared economy as contingent on three factors: 1) the sustainability of the shared goods, eg renting may enable a reduction in the number of goods produced, provided that the rented good does not wear out faster; 2) the optimisation of the transport, because the long distance transport of goods is reduced while transport over shorter distances increases; and 3) consumption patterns, as sharing models can also be a driver of hyperconsumption.

Additional considerations are the environmental impact of a product during its use phase: for example, will the most shared vehicles be fuel efficient? Electric? Hummers? Helicopters? Bikes? And the rebound effect may show up in a variety of other ways. Halving the cost of my petrol tank by picking up a passenger may make me drive to Sheffield twice as often as before and, given I can rent out my apartment on Airbnb while I’m gone, I could probably afford to fly to the south of France instead.

The research is in its infancy and there’s much still to learn, but it’s clear that the sharing economy isn’t automagically going to benefit the environment. The devil’s in the detail.

Policy is catching up
As with many technologically driven phenomena, policy is playing catch up. There are a number of labour rights, market competition and consumer protection issues that are demanding regulators’ attention, with responses across the world spanning the full spectrum from removing barriers to sharing to banning sharing economy companies outright. Environmental concerns haven’t been at the forefront of policy makers’ minds.

Policy could clearly play a role in enabling the sharing economy to be more sustainable. This may involve incentives for companies with more sustainable business models, or legislation to prioritise design of products for durability. It could mean efficiency requirements for car sharing platforms. There will need to be considerations as to whether this is best done at city, region, country or international level.

It’s a prize worth chasing
PwC expects the sharing economy to mushroom by a whopping 2,233 per cent  over the next ten years and the potential environmental benefits are huge. IDDRI posits that sharing economy practices could reduce household waste by 33 per cent, not to mention its potential to reduce demand on resources. Playing up these benefits and being aware of the dangers to the environment in terms of energy use and increased consumption will be crucial as the industry continues to grow.

Ten years ago the idea of reducing our carbon footprint by sharing a neighbourhood washing machine would have been laughable. Now these ideas are being taken seriously. They may not have been incentivised by environmental concerns, but so much the better. It’s starting to make economic sense to tread more lightly on the planet, and we should ride this wave as far as we can.

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