With startup success stories, acres of media coverage and stacks of investment, for better or worse the sharing economy has earned its place on the hype cycle of new trends and technologies in recent years. Use of the term and development of models have grown in parallel with the circular economy and the two concepts are clearly linked. This article will aim to answer some of the basic questions. What exactly do we mean by the term “sharing economy”? How does it relate to the circular economy? What are the main challenges or concerns about the growth of these models and what might this mean for a regenerative vision?
What is the sharing economy?
Defining the sharing economy is surprisingly challenging, particularly considering how widespread the term’s usage is, and definitions are often mixed in with a range of other vocabulary, including peer-to-peer economy, collaborative economy, on-demand economy and collaborative consumption.
Clarity of definition has perhaps become increasingly muddied in a context where sharing models are simultaneously associated with a vision of startups and the enablement of small scale businesses, and massive, dominating monopolies like Airbnb and Uber.
Esteemed author and speaker on the subject, Rachel Botsman, aimed to bring clarity around the different concepts and their meaning in a piece published in Fast Company last year. At the core of Botsman’s article was the idea that businesses labelled as sharing economy are actually doing very different things, she distinguished between four different terms:
Collaborative economy – the creation of decentralised networks and marketplaces to unlock the value of underused assets, like Etsy or eBay.
Sharing economy – the sharing of the use of assets that have untapped or unused capacity, like Airbnb.
Collaborative consumption – the reinvention of traditional market behaviours like renting, lending and swapping through the power of digital technology, for example in a model like Zipcar or bike sharing schemes.
On-demand economy – models that directly match customer needs with providers to deliver goods and services, like Uber.
Judging the value of these definitions is of course difficult and there’s still something ultimately unsatisfactory about attempting to split the trend along the lines suggested here. However, a critical issue is that sharing economy has become an all encompassing term for a range of different trends. The services offered by an on-demand service like Uber, an on-demand product like Zipcar and a collaborative marketplace like BlaBlaCar are all quite different for example, even if they can be broadly categorised as “car-sharing”.
Where do sharing and collaborative models fit in with the circular economy?
Digitally-enabled technology solutions that connect customers and business through an app providing a product or service more cheaply, quickly and conveniently, while the added utilisation of existing products, rather than the production of new things, allows the platforms to sell a lot with significantly reduced costs, have been successful. Startups, especially in the U.S. and Europe have taken advantage of this basic model, while, regardless of some of the bigger value-related questions associated with Uber and Airbnb, there’s no question that they are examples of the potential of digital business opportunities. Airbnb is fast becoming the largest hotel firm in the world, in terms of beds let per year, and the company has not constructed a single room.
Sharing and collaborative models are one part of the picture of a circular economy. They can play a role in extending the amount of time a product is in use, while maximising utilisation. In Growth Within, a report focusing specifically on the circular economy in Europe, it was identified that the average car is parked more than 90% of the time, office spaces are unoccupied 30-50% of the time during working hours and one third of all food is wasted across the value chain.
These models also exploit the highest value opportunities within a circular economy, the cycles of reuse where the product’s integrity is maintained and the greatest amount of embedded energy and labour is retained. This evolution has taken place in a context of fast-developing mobile technology and a growing acceptance of a changing relationship between businesses and their customers, a transition to accessing products and services, rather than owning them (when the overall benefits to the customer are greater).
Challenges to the sharing economy
The combination of the development of mobile technologies and growing awareness of idle capacity, particularly within cities, has made sharing and collaborative models the low-hanging fruit in the circular model. However, while profits and growth are positives on the one hand, the trend’s rise has also been accompanied by a number of challenges.
Companies like Uber have been widely criticised, particularly on the labour rights front, where the service makes many currently employed taxi drivers redundant, while offer alternative work that doesn’t offer the same benefits or protections. Indeed, the growth of these models, when viewed from the perspective of workers, could be viewed as part of a trend where compensation for work has become disconnected from productivity in the economy. A piece in Fast Company last year suggested that workers in the gig, collaborative and sharing space are compensated on average 25% less in hourly wage, and this has also been coupled with a gradual reduction in the power of labour in the workplace in the U.S. and many European countries – another factor that could find its ultimate realisation in the sharing economy.
While policymakers are charged with the task of figuring out what course of regulatory action to take to ensure the protection to protect ordinary people, many of these businesses act monopolistically to maintain control of the market. “Rentier capitalism” where a smaller and smaller group of businesses and individuals own a larger and larger percentage of resources and wealth is already a concern for many in today’s economy, and these issues could be further exacerbated by the market dominance of platforms like Uber and Airbnb.
What does this mean for the circular economy?
Sharing and collaborative models may form just one part of the larger systemic circular economy picture, but the broader questions now being asked have clear implications for the system depicted in the butterfly diagram. Is it enough to take advantage of digital technologies to maximise use of and optimise resource and material flows, or do other values need to be embedded in this vision? It could be argued that these issues exist separately from the transition to a more regenerative system, but then the prosperity offered by a circular model seems less valuable somehow.
Zipcar co-founder and author of popular book Peers Inc, Robin Chase, takes a more optimistic view of the future of the sharing economy. She sees successful business models that are here to stay, warns against judging the trend only by its most high profile negative examples and suggests that policy and value adjustments are needed to create the system conditions that enable the most positive aspects of the model in terms of effective resource use, community benefit, entrepreneurship and innovation to thrive.