What is the sharing economy?
Beyond sharing on social media, including Facebook, Instagram, and Twitter, where ideas and images are shared across the world, there is an emerging segment of the economy where goods and services are shared, for a fee, with other consumers.
The sharing economy, or “digital matching firms” according the United States Economics and Statistics Administration, includes those companies that use IT systems to assist the connections between users, rely on rating systems by their customers, offer flexibility with working hours for their employees, and rely on employees to use their own devices when conducting business.
From the Inevitable by Kevin Kelly, “…when it is obvious to you that open source software is better than polished proprietary goods, when you are certain sharing your photos and other data yields more than safeguarding them — then these assumptions will become a platform for a yet more radical embrace of the common wealth” (271). Moving beyond the sharing of ideas, the sharing economy offers the ability to “embrace the common wealth” as Kevin Kelly puts it, to use our collective resources together and improve those items continuously.
Airbnb. Uber. Lyft.
These companies are great examples of the sharing economy, where individuals rent out the use of their items to other consumers. There is not only consumer to consumer selling within the sharing economy, but entire business models based on renting products or services for a price. Thanks to the internet, the sharing economy has grown to be a very economical business sector. “Such collaborative consumption is a good thing for several reasons. Owners make money from unused assets.”[2] This can allow consumers to make a supplementary income from items that they already own. For example, with Uber, car drivers can choose which hours that they drive and can take advantage of free time that they have in their schedule to earn extra income. With Airbnb, hosts can list part or their entire home or apartment for travelers to stay while on vacation. The company also provides professional photography services for hosts to show professional pictures of their home on the website. Part of the reason why the sharing economy has been so successful is the technology that allows for this type of person to person and business to business sharing.
What is sustainability?
“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two key concepts:
- the concept of needs, in particular the essential needs of the world’s poor, to which overriding priority should be given; and
- the idea of limitations imposed by the state of technology and social organization on the environment’s ability to meet present and future needs.”[3]
Breaking down this definition, sustainability is a very complex and interdisciplinary term. It is widely used by businesses and individuals yet, not typically understood. To “meet the needs of the present without compromising the ability of future generations to meet their own needs” is to use only the resources needed for your survival, while leaving enough for them to replenish for future users. The world as a whole, and us as individuals are currently not focused enough on this idea. There is a finite amount of resources left on the earth, and we are limited not only by those resources but also by the current technology.
This definition also includes two important concepts, those of needs and of limitations. The concept of needs in this definition focuses on giving priority to the poorest individuals in the world, yet another sector where our current world lacks. Inequality and distribution of wealth is a problem faced around the world, yet is largely ignored by developed nations. We are limited by our environment and while technology can expand those limitations, it too has limits.
From the Inevitable by Kevin Kelly, “Paul Romer…says real sustainable economic growth does not stem from new resources but from existing resources that are rearranged to make them more valuable” (193). Using existing resources more efficiently and effectively is another important key to sustainability and sustainable growth. With a finite number of resources on earth, we must be able to find creative uses of those resources to keep up with the growing global population.
Environmental impact of shipping/packaging
With the sharing economy, especially with tangible goods, additional packaging and shipping needs exist. If you purchase a rental dress, after you have worn the item, it will need to be shipped back to the company or individual renting out the dress then washed and repackaged for the next consumer. This cycle adds additional packaging and shipping strains on the environment and its resources, both of which have negative impacts on the environment. Shipping involves the emission of carbon dioxide and other fossil fuels, especially through air freight. Packaging often involves plastic materials that do not decompose are harmful to animals. Repacking goods after each use by a consumer adds to the impact of packaging on the environment, especially if the original packaging is not reused in any way.
Water use in clothing production
One of the main environmental concerns with clothing production is the use of water, and jeans require massive quantities of water not only in the production of the jeans, but also in the use by the consumer who likely washes the pants more than necessary, using more water than required. Levi Strauss recognized this important impact that their jeans have on the environment which led to the company creating a life cycle assessment for their jeans where they investigated not only the water impact from jeans, but also the production of jeans and where cotton is sourced from.
A single pair of Levi 501 jeans “uses 3,781 liters of water in its full lifecycle”, which includes “growing cotton, through manufacturing, consumer care at home and end of life disposal”[4]. The average woman owns seven pairs of jeans, yet only wear four pairs regularly[5]. Taking the lifecycle water use from a single pair of Levi 501 jeans, that is nearly 27,000 liters of water for all the jeans a woman owns, but only 15,000 liters for the jeans that are worn regularly. With the sharing economy, there is an opportunity to massively reduce the amount of water used in producing jeans by renting or sharing those three pairs on average that a woman does not wear regularly, saving up to roughly 12,000 liters of water per woman. This example applies only to one product, but you can imagine the water that could be saved from producing less consumer goods. Sharing items with other consumers reduces the need for ownership of items for individuals and also the production of those goods.
“The expansion of the sharing economy offers a more sustainable alternative to mainstream economics. It challenges growth as the marker of success and invests significance back into localised systems of exchange. In light of an impending energy crisis, a financial system that benefits few at the expense of many, and environmental degradation caused by unchecked, unnecessary consumption, it’s clear something has to change.”[6]
What is the impact of the sharing economy on the environment?
It is difficult to fully assess the environmental impact of the sharing economy on the environment because of the complexity of this new industry segment. In theory, by sharing or renting items, there will be a decreased need for goods and services than before, resulting in a decreased production. With fewer goods being produced, there will be fewer effluents emitted into the environment and a reduction of CO2 and fossil fuel emissions. While studies exist that demonstrate energy savings from sharing services, such as an Airbnb study through the Cleantech Group, that claims reductions in greenhouse gas emissions from Airbnb services, stating avoidance in reduction equivalents to 33,000 cars in the United States and 200,000 cars in Europe. It also claims that its guests saved the equivalent of 270 Olympic sized pools of water in the United States and the equivalent of 1,100 pools in Europe[7]. The study explains that individual consumers using the renting services provided on their sites are impacting the environment less than if they were to stay in a large hotel. Additionally, the company describes that is offers sustainable tourism through home-sharing that are a better alternative that large hotel chains, its hosts recycle and guests are more likely to use public transportation while staying at an Airbnb. The problem with this study is that the full impact was not published online and does not explain the methods used when calculating its greenhouse gas reductions. Collecting data to show the environmental impact of the sharing economy is challenging, which in turn makes determining how environmentally friendly the sharing economy difficult.
“Eighty percent of the things in our homes are used less than once a month, and self-storage has increased by 1,000% over the past three decades”[8]
Imagine if those items used less than once a month were not owned by individuals, but instead shared among a group of people, there would be less demand for those items. A neighborhood could share power tools for example, reducing the need for individual households to have their own set. Potentially, the 80 percent of those items used less than once a month could all be shared or rented for the period of use, reducing the overall consumption behaviors of consumers across the globe.
“There is significant environmental benefit to increasing the use of existing goods and reducing the demand for new goods.” — Anders Fremstad, Colorado State University[9]
Some sharing services are already moving towards this concept of increasing demands for existing goods and services, where there is less need for consumers to own personal items. Kevin Kelly explains in the Inevitable, “We see sharing economy services such as Netflix and Spotify move audiences away from owning anything” (138). Netflix and other movie streaming services reduce the demand for physical copies of movies or television shows. In fact, Netflix is showing a massive drop in its DVD subscribers, but a large increase in streaming users. There were nearly 14 million DVD subscribers in 2011, currently down to 4 million in 2016[10]. For streaming users, nearly 87 million use Netflix’s services in 2016, up from 22 million in 2011[11]. More users only using streaming services for online viewing purposes will lead to a decrease in demand for physical DVD’s, again reducing the environmental stress caused from production.
Lastly, will the sharing economy help reduce our overall environmental impact?
The earth’s population is growing rapidly, more than seven billion people live on this planet who consume, produce, and waste resources. In the next decades the earth will be increasingly pressured for its resources and there will be a need for innovation to meet those needs.
Car sharing services such as Uber and Lyft allow customers to request rides from their cell phones, potentially reducing the number of cars on the road and the amount of carbon dioxide emitted from those cars. A study conducted by researchers at the University of California, found that during rush hour, a section of Interstate 110 emits over 160 metric tons of CO2 from congested traffic. If the traffic flow was improved, where vehicles could travel “20 miles per hour faster…CO2 emissions would drop 12%, resulting in a reduction of 21 metric tons of CO2.” For a full year, that reduction in CO2 emissions amounts to 249,000 metric tons, equivalent to taking 40,000 cars off the road[12]. Improved traffic flow worldwide, through the use of car sharing services is one way to reduce global carbon dioxide emissions.
Human activities has led to an increase in global temperatures, known as climate change, through the emissions of greenhouse gasses. By reducing carbon dioxide emissions, there is great potential to slow the impact of climate change on our environment.
Overall, it is difficult to determine the exact impact of the sharing economy on our environment, without strong data to show if the sharing economy does reduce our overall destruction of the environment, there is only speculation. It is important to note that the potential exists for the sharing economy to reduce overall environmental impacts. Expanding the sharing economy to all types of goods and services will likely lead to a reduction in demand for those goods, and thus a reduction in production. Individuals can invest in higher quality products that are made better and last longer, which also reduces emissions. In the coming years, the growth of the sharing economy will continue along with the need to find new ways of combating climate change. There is potential for the sharing economy to be a major contributing factor in reducing the effects of global warming, but it will require massive growth and dedication from businesses for this to become a reality.
“Sharing assets won’t save the world from warming up, but if it reduces waste or the need to own a car, that’s a start. If it boosts consumption and personal income in a period of low growth, that’s to be encouraged, too.”[13]
Reducing waste, thus saving space in landfills is yet another area for potential reduction in environmental impacts from the sharing economy. Reducing individuals needs to own a personal vehicle reduces greenhouse gas emissions. These are other important impacts of the sharing economy on the environment. Even if the impacts are only speculative, we are living in a period with massive environmental degradation and human caused increasing global temperatures. Future generations will need to find ways to curb the impacts of climate change and the sharing economy could be the solution.
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About the Author:
My name is Kelsey McCauley. I am from Portland, Oregon, but currently live in Missoula, Montana where I am studying marketing with a sustainable business strategy certificate. From a very young age I have had a great passion and interest in the environment. I strongly believe that businesses can make a positive impact on the environment and are important stakeholders to reducing the impacts of climate change. Sustainable business is a fast growing sector, one that I am very interested in pursuing in my future career which led me to pursue the topic of sustainability in the sharing economy.
