Contribute to a better world = Be a successful company. Sustainability in a shared-economy startup.

During my MBA study, it was expected to complete a lot of business assignments. Some of the assignments were limited to a pre-selected list of companies, and I couldn’t really enjoy it fully. But in a few courses it was allowed to choose any company for the assessment, so I could pick the one that I personally admire. Among my long-time favorites were two companies that pioneered the shared-economy business model — UBER and AirBnB.

At the time of writing the assignments, my husband used to work at UBER, and I was personally attached to the company, so it was natural to use UBER as an example company for my Sustainability course assignment. During my assessment of the company I tried to distance myself from the company itself, which has suffered a lot from a bad publicity in 2016–2017, and to only consider it as a major contributor, if not the company that actually popularized the shared economy concepts beyond the very narrow academic circles.

In start-ups like UBER or AirBnB, sustainable practices are embraced from the beginning.

Why sustainability is important? A simple reply would be — because our future depends on it. Business sustainability is something that all businesses, no matter of size, are confronting today. My personal observation is that in a newly created start-ups like UBER or AirBnB, sustainable practices are embraced from the beginning and even the initial set-up of these companies are very different from brick-and-mortar 20th-century businesses.

So, the question I’m answering is: are the shared-economy companies like UBER sustainable or not? My gut feeling was surely saying me YES, but wanted to apply a more academic approach to actually understand how sustainable they are.

Let’s start with definitions. The most commonly accepted definition for Sustainable development is:

“Development that meets the needs of the present without the compromising the ability of future generations to meet their own needs” (Brundtland Commission, 2017).

And for Sustainability:

“The possibility that humans and other life will flourish on Earth forever” (Ehrenfeld, 2008).

Economic sustainability represents the need to guarantee economic success to a company and its stakeholders (Vachon and Mao, 2008; Steurer and Konrad, 2009; Dyllick and Hockerts, 2002). Environmental sustainability is concerned with reducing environmental impact through more efficient use of materials and natural resources and pollution prevention (Rothenberg, 2001). Social sustainability involves benefits that have an impact both outside the company (i.e. benefits that a company may bring to the surrounding society) and inside the company (i.e. supporting worker health, safety and well-being, encouraging future generations to develop skills and capabilities, and promoting high quality of life) (Pagell and Wu, 2009).

Triple bottom line framework & UBER

To make an assessment of a shared-economy company, I will be using triple bottom line framework, which was created by John Elkington (Elkington, 1997). It describes separate financial, social and environmental “bottom lines” of companies.

Companies should apply three bottom lines instead of focusing purely on its finance.

Triple bottom line (TBL) framework measures the company’s economic value, “people account” (the company’s degree of social responsibility), and “planet account” (the company’s environmental responsibility). Elkington stated that companies should apply three bottom lines instead of focusing purely on its finance.

Picture 1: The three pillars of John Elkington’s triple bottom line to sustainable business.

Sustainability lives in the intersection of 3 circles, and combines 3 aspects: Social-economic, Environmental-economic and Social-Environmental:

Picture 2: The three pillars (with examples) of John Elkington’s triple bottom line to sustainable business.

With the application to UBER, the company’s practices span to every pillar of the TBL framework.

Picture 3: Break-down of UBER by John Elkington’s triple bottom line framework to sustainable business.

For the society pillar, UBER increases standards of living, creates new jobs, creates equal opportunities at this jobs. The company also cares about the safety at workplace and regularly publishes transparency reports.

For the economic pillar, UBER stimulates economic growth for the society by creating a more affordable private transportation, for the end customers the company saves the money by offering lower cost of transportation. The company also stimulates economy with technical innovation.

For the environmental pillar, the company tries to minimize carbon footprint by launching a special leasing program to help drivers to adopt electric cars (UBER Wants Drivers to Use Electric Cars. (n.d.)), as well as implementing initiatives like UBERPOOL.

Here, I specifically placed ride-sharing service into all 3 pillars, because it impacts the society by helping people to travel more easily, the economy by helping passengers to minimize travel costs and car owners to earn more, and the environment by minimizing the pollution by using cars at higher capacity.

In my opinion, the most challenging part for any company is to have practices at the intersection of pillars — Social-Economic, Social-Environmental and Environmental-Economic.

In application to UBER these factors can be defined as:

Social-Economic — sharing economy

A sharing economy, or a collaborative consumption, or a peer economy, refers to a hybrid market model (which lies between owning and gift-giving) of a peer-to-peer exchange (Sharing economy, 2017). Transactions in the shared economy are often facilitated via community-based online services, and UBER was one of the founders of this innovative new market. UBER transforms private cars into a common and shared resource, while creating benefits for the society and for the economy.

Social-Environmental — sustainable transportation

One of the company’s biggest contribution to the shared economy is its concept of pool rides (UBERPOOL) that brings together benefits for the society (by lowering the cost of transportation) and for the environment (by lowering green-house emissions footprint). As a part of facilitating its contributions to the society, the company is sharing its data to help transform cities via its blog: “The data will provide new insights to help manage urban growth, relieve traffic congestion, expand public transportation, and reduce greenhouse gas emissions”.

Environmental-Economic — self-driving electric cars

The company has strategic plans and R&D targets for the development of self-driving cars, which will bring environmental and business benefits together.

Successfully implemented, these practices could lead UBER to the sustainability by TBL.

Another step forward to achieve sustainability at full scale at UBER is to build a sustainable supply chain around organizational processes.

By analyzing UBER I came to the conclusion that UBER has consistently shown its dedication to making the world a better place while implementing a well-proven business model.

Broad in scope, UBER’s corporate social responsibility initiatives address wide range of social issues. Application of the TBL model to UBER demonstrated that the company has implemented sustainability in all of the three pillars and does not have many issues to fix in short- or long-term perspectives. The major problem for UBER is now growth vs. profit dilemma. Currently the company is making losses, that can be acceptable for the start-up of early stage, but in the short perspective UBER needs to get faster to the organic growth phase, finishing “growth at any cost” strategy.

Hey, I’m Lena! I am passionate about technological product development and I can effectively lead teams through the end-to-end lifespan of complex digital products from concept to product market fit and growth. Want to work together? Email me at le@okidoki.ai.

References

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13. Uber Wants Drivers to Use Electric Cars. (n.d.). Retrieved June 09, 2017, from http://time.com/4738300/uber-electric-cars-vehicles-portland/
14. Sharing economy. (2017, June 09). Retrieved June 09, 2017, from https://en.wikipedia.org/wiki/Sharing_economy
15. Bob Willard, 2009, The Sustainability champion’s guidebook, New society publishers, p.11