Shareconomy – a path to sustainability

 by Efthymia Eleftheriadou, Research Analyst at GES

‘The average power drill is used around 12 to 15 minutes over its lifetime’, is a phrase that is very often cited by people who want to discuss the benefits of the sharing economy – shareconomy. The question of the underutilisation of an asset (for example, the above-mentioned drill) or a skill is fundamental in this discussion. From people who rent their spare rooms (e.g. Airbnb), to those who can help with home repairs (e.g. TaskRabbit) in exchange for money, a sharing economy has become a breeding ground for social entrepreneurship, powered by new informational technologies.

The sharing business model has a role to play in the closed loop of a circular economy by extending the amount of time a product is in use while maximizing its utilisation[1]. It decreases resource consumption and at the same time, increases access to resources and services, allowing for the emergence of social groups and the creation of economic opportunities. It builds trust among users, who give their feedback on their experience through review systems. It creates efficiency in the market by instantly connecting the consumer with the producer. This new model has had such a great impact that it has disrupted traditional businesses and put a lot of pressure on industries like hospitality and transport. The value of the shareconomy today is estimated at around USD 250 billion and it is predicted to morph into a USD 2 trillion market in the near future[2]. Such rapid growth can be appealing to investors. And although millennials (and younger generations) are, without a doubt, the largest cohorts in the sharing economy, all demographics are increasingly getting into sharing companies[3].

This new business model has a feel-good aspect attached to it, but not everything is as bright as it might seem. A lack of regulation, tax avoidance, liability issues and an erosion of labour rights are just some of the shortcomings of the sharing economy. Its critics also strongly oppose the name, calling it a euphemism for a desperate economy, suggesting that a renting economy would be a more suitable term to describe the phenomenon. This model cuts out the middlemen, which means it reduces transaction costs, therefore making the shared services cheaper, faster and easier to access through online platforms. A discussion with any user will reveal that it is the economic benefits and flexibility that mostly drive people to use such services, rather than, for example, their concern to reduce their carbon footprints ( BlaBlaCar).

It looks like the sharing economy will keep growing but its social and environmental impact is not yet clear. This new economic activity has great potential. It promises the empowerment of ordinary people and a more sustainable future by making better use of our limited resources and therefore minimising waste. People have the right to monetise their assets but without engaging in business practices that may endanger consumer safety. The next challenge for the shareconomy will be to democratise the ownership and governance of online platforms[4].

 

[1] https://circulatenews.org/2016/08/what-does-the-sharing-economy-mean-for-a-circular-economy/

[2] https://www.investopedia.com/investing/what-are-biggest-stocks-sharing-economy/

[3] https://www.cnbc.com/2017/07/26/how-stock-investors-are-cashing-in-on-the-red-hot-sharing-economy-trend.html

[4] https://www.ceeol.com/search/article-detail?id=430188

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