The challenge of sharing sustainably

Opinion by Matthias Lehner, postdoc at the International Institute for Industrial Environmental Economics (IIIEE), Lund University.

Airbnb is a hugely successful American company that has managed to make us invite strangers into our own private homes. I visited New Zealand last winter and stayed with an old lady in her private home outside Nelson, and it was an exciting experience where I got to know someone I otherwise would never have met. For a small fee, I got to stay in a spare room that had stood empty ever since her children moved out. Situations like this is precisely why Airbnb has become a huge success story.

Airbnb is one of the most famous participants in what is known as “sharing economy”, and has received a lot of attention in recent years. Another one is Uber – a business idea where private individuals provide taxi services using an app that connects drivers with paying customers. When this type of platform was first introduced, attention was mainly paid to those with the same type of reaction as I had last winter: that individuals, usually complete strangers to each other, who suddenly begin sharing their things, cars and homes is something new and exciting.

The hopes were high that this would lead to a more resource-efficient, social, and fair way of consuming. I am sure we have all heard of the power drill that is only used for 12 minutes during its entire lifetime, or the car that stays parked 95 per cent of the time. The logic that it would be good, in every way, to increase the usage rate is obvious. Books like What’s Mine is Yours by Rachel Botsman and Roo Rogers contributed to a hype that led to a lot of community activity and resulted, among other things, in networks such as OuiShare, which aims to strengthen the sharing economy.

Unfortunately, the sharing economy is not all you hoped for. The great potential behind the concept lies in reduced transaction costs[1] as a result of huge progress in ICT (information- and communication technologies) and changes in consumer behaviour. But the success of the sharing economy also has other effects that are not always desirable.

First of all, success stories like Uber or Airbnb are only partly the result of reduced transaction costs and changed consumer behaviour. Instead, both Uber and Airbnb have been accused of their operations leading to poorer and unstable working conditions for those who ultimately carry out the work (those who drive Uber cars or those who welcome guests into their homes via Airbnb). Both platforms have also led to undeclared earnings.

Furthermore, the sharing economy concept is also used too broadly and many companies who claim to be part of it are, in fact, ordinary staffing or car rental companies using modern technologies in the form of the internet and mobile phones to reduce their costs. In many cases, the only thing new about this is that the transaction costs are much lower which makes it comparatively cheaper to rent than to own. This is true for ICT on the whole, and is therefore by no means specific to the sharing economy.

Whether lower transaction costs ultimately lead to more sustainable consumption will depend on the consequences of the lower costs. Most likely, technological developments will lead to increased sharing of goods and thus increased efficiency in the use of a product. At the same time, there is a great risk that consumers will use the money they save to consume more. Historically, technological advances and, therefore, higher purchasing power have mainly led to increased overall consumption.

The sharing economy can be a tool for achieving more sustainable consumption, but I would argue that it is not the solution. The solution still lies in policy decisions on reduced resource consumption, improved recycling and less waste. The sharing economy can, however, help make these policy decisions easier to implement, as consumers are given the opportunity to cover the same needs with reduced resource consumption using new technology.

Photo: Peter Frodin

[1] Transaction costs are the costs added to the price of the product or service itself which arise in connection with a transaction, i.e. anything needed to complete the transaction, e.g. the gathering of information to assess the quality.

Facts

Transaction costs

Transaction costs are the costs added to the price of the product or service itself which arise in connection with a transaction, i.e. anything needed to complete the transaction, e.g. the gathering of information to assess the quality