Globalfields insight

The sharing economy

March 2020
Systems of the sharing economy can positively impact the environment by improving resource efficiency and promoting sustainable growth by mitigating excess consumption. This is an important consideration as global resource use is expected to double by 2050, meaning that efficient resource management in terms of production, manufacturing and usage is now essential to mitigate the negative effects of climate change and environmental degradation.

Marta Simonetti | Martina Chow

The sharing economy is a term that few are unfamiliar with nowadays. It refers to digitalised platforms for peer-to-peer exchanges that focus on community-experience and sharing under-utilised assets in an efficient and sustainable way. The sharing economy is common in the fields of transport, with services like Uber, Zipcar or Didi; consumer goods like Ebay or Etsy; professional and personal services such as Taskrabbit or Airbnb; and even in healthcare through systems like Doctor on Demand. As an industry, a 2014 PwC report states that it is estimated to grow to USD335 billion in value by 2025 from USD14 billion in 2014. In line with this trend, China is set to scale it up and have it account for 10% of the country’s GDP by 2020. Yet like smart city developments, the sustainability of the sharing economy should not be presumed to be inherent. Considerations over ‘share-washing’ have also opened up the debate over the realisable impacts of these impacts. Still, with growing intergenerational differences regarding technology, the importance of ownership and concerns about climate change, will the sharing economy come to further define our future society in an economically progressive and environmentally sustainable way?

Photo by Lauren Fleischmann on Unsplash

Systems of the sharing economy can positively impact the environment in a number of ways. First, they improve resource efficiency and promote sustainable growth by mitigating excess consumption, resulting in fewer wasted resources. This is an important consideration as global resource use is expected to double by 2050, meaning that efficient resource management in terms of production, manufacturing and usage is now essential to mitigate the negative effects of climate change and environmental degradation. By encouraging individuals to share and redistribute resources – with cars sharing and ride hailing platforms, the buying, selling and exchanging of used clothes or the short-term renting of homes – unnecessary consumption is discouraged as ownership no longer acts the only avenue for access to goods and services. While these models of resource redistribution have long existed across human civilisations through neighbourhood backyard sales or clothing hand-me-downs amongst friends and family, the advancement of technology has enabled these exchanges to cross familial, communal and national boundaries. There is less of a need to own a car to guarantee easy mobility, to own a holiday home to go on vacation or to own a drill to make changes in your home. This could see a reduction in waste and a more efficient use of recourses which translates into a more sustainable lifestyle without curtailing economic growth. With a system like Airbnb, for example, water wastage can be lessened, as unlike in hotels, towels and linens are not unnecessarily washed and changed daily. This gives the consumer more agency in dictating what needs to be washed and when – a small detail that can magnify into a significant environmental contribution. Similarly, transportation sharing economies can minimise fuel consumption as it is easier for car-sharing companies, who have access to more resources to promote newer, more efficient cars, than for private vehicle owners. Sharing economy systems can also contribute to reducing emissions. A recent study by the Nordic co-operation on the effects of the sharing economy on emission reductions in Nordic countries found that car-sharing, for example, has the potential to reduce carbon dioxide emissions by approximately 40 to 140kg per household member per year as a result of reduced production and maintenance of cars. The use of personal services like Airbnb compared to tradition hotels have a similar potential, in that the reduced waste can translate into a reduction of carbon dioxide emissions of approximately 2 to 3kg per person per year. Sharing goods and services, cars especially, can also mitigate pollution. In addition to emission reductions, car sharing platforms incentivise consumers to car-pool. This reduces the number of trips, which minimises the amount of particulate matter, an exhaust pollutant released from vehicles and road dust that is extremely harmful to human health and to the environment. By this logic, the sharing economy can work as a means to reduce the negative externalities – economic and environmental impacts – that are otherwise associated with traditional services. This is because service providers are generally better equipped, technically and financially, to upgrade their investments in a sustainable manner, and to absorb the capital costs of ‘greening’ their processes. In these pay-for-service models, customers pay per unit of the service used, while the technology, goods, infrastructure and its maintenance are paid for by service providers. This helps address the investment and financing barriers for the development of infrastructure required of the sharing economy model.  A growing number of international platforms in green finance are now dedicating time and resources to the deployment of these ‘more innovative’ financing structures.

The sharing economy has meant that ownership, in the traditional sense, has become increasingly less common, and this can yield important environmental benefits as it pertains to reduced waste, emissions and pollution. Intergenerational differences, between millennials and their predecessors, are most evident with regard to intergenerational priorities. Millennials are more likely to live at home longer, have a lower preference for vehicle ownership, have immense student debts and and have technology be an integral feature of their lives than their Gen X predecessors. The iGen is similar, though their exposure to technology is more innate. This reluctance toward ownership has links to the recession, which was said to have hit the younger generation the hardest. Low wages, low savings and high student debts make ownership – vehicle or property – a much less attractive prospect. It is, however, also deemed to be a more permanent feature of the values younger generation, who are more likely to prioritise experience over ownership and be concerned about climate change. In fact young adult users (below 40 years) account for more than 50% of all sharing economy spending across Turkey, Switzerland, German, Belgium, Austria and the Netherlands. Aggregated, this provides sharing economy solutions with a fertile environment to thrive. Technology has in that sense enabled the sharing economy, but its prevalence has been reinforced by changing norms around ownership and the growing importance of climate change. This is especially relevant when considering the development of sharing economies across the developing world. The African continent, for example, has an incredibly large young population, with 62% of the population under 25 years of age. Similarly, 60% of the world’s youth population (between 15 and 24 years old) resides in the Asia-Pacific region. Sharing economy initiatives thus have a vast consumer market in both African and Asia-Pacific of millennials and iGens, in particular, to tap into.

In that sense, sharing economies have the potential to contribute to sustainable change. But sustainability needs to be an explicit goal – and not just a justification in rhetoric – set by consumers, authorities and entrepreneurs combined. Authorities need to build an economic and regulatory framework that is conducive to and encourages sustainable sharing economy models as outdated rules and policies can become a significant obstacle. Simultaneously, entrepreneurs, be they in transport or healthcare, need to start their initiatives off with a clear understanding of the necessary conditions to address sustainability concerns and in turn ensure that environmental sustainability can be a practical and concrete objective. Finally, the environmental contribution of these models also depends on the consumer – their behaviour and the values that drive them. In that sense, societal mindsets and trust become key components in the development of a sustainable sharing economy as consumers need to value sustainable goods and services and trust that they are reliable and legitimate. Consequently, authorities, entrepreneurs and consumers need to work together to promote shared goods and services the are designed and function sustainably. At Globalfields we share the view that this integrated approach is fundamental. Working with institutions to design and structure pay-per-service models and investments in platforms that promote sustainable processes are included in our business propositions, with key emphasis being directed to fostering equally supply and demand in green finance, financial mechanisms and products.

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