The sharing economy, is it really sustainable, and profitable?
Executive Summary
“The average U.S. household has 300,000 things, from paper clips to ironing boards.” Source and a lot of it are rarely used. Would there be a better way to reallocate all this extra stuff that we have? These things that we can not get rid of, for many reasons, like monetary or sentimental value, but we don’t actually need them every day, so what’s the point of owning them? We have been arriving at a point where it is now normal to buy something, use it a few times and throw it away, this is the kind of behavior that is dangerous for our planet. In recent years, there has been a growing concern for the environmental crisis we are facing, many people are trying to find new ways to produce and consume as our current model is not sustainable. The concept of sustainability “focuses on meeting the needs of the present without compromising the ability of future generations to meet their needs.” Source. The sharing economy, by definition, tries to solve this problem. But it is not easy to define the sharing economy in a way that keeps clarity while also including the wide variety of ways the term is used. Source. A great definition of the sharing economy is “the peer-to-peer-based activity of obtaining, giving, or sharing the access to goods and services, coordinated through community-based online services” Source. The goal of the modern sharing economy is to better utilize underused goods and services which differs from more traditional types of businesses where companies hire employees to produce products that can be sold to consumers. In the sharing economy, individuals are able to share or rent things like their homes, cars, and time to other people. There are 2 main types of the modern sharing economy, initiatives, where goods and services are provided for a small subscription or for free, where people are not supposed to gain profit from it, and then there is sharing economy as a business model where a company usually creates a solution where people can sell and buy their services and goods, the company’s goal is to make a profit from it. Some people believe that the only “real” type of sharing economy is the one where the goal is non-profit, this is emphasized as many companies that have created a “sharing platform” definitely have not been sustainable because of their pursuit of profit. But in the world we live in, it is unlikely that many companies will start to offer solutions for free without having the goal of profit, so my question is: Can the sharing economy model when used for profit really makes us more sustainable? In the first part of this essay, I will present an introduction to the sharing economy and sustainability and then explore the different models and examples of the sharing economy, and explore how profitable and sustainable they are. The goal of this essay is to show that the sharing economy can be sustainable and profitable at the same time if the aim is to reduce overconsumption and there are safeguards put in place so that these platforms don’t get abused.
I. An introduction to the sharing economy and sustainability
The creation, first examples, and evolution of the Sharing economy
Sharing has evolved alongside humans for centuries, as a tool for survival, so that we could concentrate our efforts on different things but share the benefits of all those things. “Sharing has probably been the basic form of economic distribution in hominid societies for several hundred thousand years. It is based in human biological behaviors… and becomes a powerful force for solidarity between communities” Source. Sharing was necessary for survival, people would share their tools with their neighbors, while not asking for something in return as they knew they would need something from them the next day. As communities started growing, a more “organized” economy started growing towards a community-oriented trading and bartering economy. This was the first kind of peer-to-peer economy, there were very few intermediaries and most goods were just exchanged between people directly. Fast forward to the rise of structured, and organized civilizations which allow people to create with more efficiency, which started replacing traditional peer-to-peer systems, which could not be as abundant as these new types of production. This led to the creation of centralized services, which helps society to get organized for the production and distribution of goods but this abundance economy also gave rise to misallocation and waste. This is why, in the last few years, people have been trying to make this type of economy exist again where underused products can be used by people that need them, especially with the increasing pressure we are feeling from the environmental crisis. Sharing is not a new concept but in recent years, new technologies enable us to rethink how we could share our underused goods. For many people, the first sharing economy platforms would be eBay (Source) which was launched in 1995 as well as craigslist (Source) which was also created during the same year. They both have become huge companies ($33bn valuation for eBay and $3bn for Craigslist) that have succeeded at building big peer-to-peer platforms where people are able to “share” and sell their services and goods. While these platforms are great examples of the first technology-based peer-to-peer solutions, they have not become the best examples of sustainable companies. The growth of eBay and similar platforms pushed people to consume more by buying cheap goods online, on the other hand, craigslist is a better example of a way to locally sell goods and services which are often already used which means they are a great way for people to reuse objects that would otherwise be thrown away. In 2000, Zipcar (Source) was created, the idea is to be able to share a car in the city, for people that just need one once in a while. It was created in Cambridge (MA) by Antje Danielson and Robin Chase with the idea of creating a better way to use cars in cities. They now have more than 1 million users across 500 cities and have a fleet of more than 10,000 vehicles. Other great examples of early Sharing economy platforms include Couchsurfing and Freecycle which managed to create websites where people could share for free their “couch” for people to sleep in while traveling and with Freecycle get rid of your things by giving them away also for free. This already shows that even at the very beginning of the sharing economies, the goal of these platforms was not the same while being put in the same category. Other companies that emerged in the years 2000, are LebonCoin and Airbnb which were created respectively in 2006 and 2008. The media attention and research around the sharing economy started growing between 2011 and 2014 as more and more people got interested in the subject. This coincides with the publication of “What’s Mine is Yours: How collaborative consumption is changing the world” by Botsman and Rogers in 2010 which played a central role in grouping the many companies facilitating peer-to-peer forms of consumption in a single field of innovation. At the time, the word describing this type of peer-to-peer platform was “collaborative consumption” which will mostly be replaced by the term “sharing economy” starting in 2013. The sharing economy now represents a huge variety of companies
Sustainability, an overconsumption problem
We have reached a point where we urgently need to find solutions to our overconsumption problem. Non-essential goods represent 21% of the material footprint of Europeans, these are all the goods that are the least important to us, like electronics, tools, and luxury items, on the other hand, examples of essential goods are food, housing, and mobility. This article from the Institute for European Environmental Policy (IEEP) underlines the importance of tackling the overconsumption model in order to “ensure that all products and services are safe for consumers and the planet.” Source. They explain that if something is not done in order to make use consume less, the consequences are going to be very problematic. If everyone in the world consumed like Europeans, we would need three Earths to have enough resources. Source. Many of these challenges are being tackled, for example, the European Environmental Bureau (EEB) explains in this article that 77% of Europeans “would rather repair their goods than buy new ones.” Source. This shows the will of many Europeans to better reuse their items instead of throwing them away. Other important numbers are about e-waste (computers, phones, batteries…) which represents 70% of toxic waste in US landfills. Source. Phones and other electronic devices are hard to recycle, to make a cell phone, 60 different types of metals are needed but only 20 of them are recyclable. This is a huge problem especially when you know that since 2014, the number of active mobile devices surpassed the number of people on Earth. Source. Phones are not the only problem, but they show that we will not be able to give electronic devices to everyone on earth without expecting environmental repercussions. Is there a way to consume less of these products? A lot of the products we use that are recyclable are actually not that recyclable as they will often just be transformed into lower quality products, as we have seen with the phones, we still consume many things that cannot be retransformed easily after their use. This shows the need to create more durable goods that can be repaired and also shared between people to make us more sustainable.
Different models of the sharing economy and their main arguments.
There are many models and forms of the sharing economy and each has a similar goal in mind but might operate in different ways. It is not rare that people separate the sharing economy platforms in 2 categories, the for-profit platforms, and the non-profit-driven platforms. This is an important distinction for many people, as it can feel weird to say that you are “sharing” your apartment when you post it on Airbnb for extra money (and on top of that the platform takes a fee), it doesn’t seem like sharing, the term “peer-to-peer” probably fits better in that case, but for marketing purposes “sharing economy” sounds better. On the other hand, many people argue that these platforms do help people to better utilize underused goods and assets which is in a way the goal of the sharing economy. Source. Then you have all the apps and platforms that give access to their services while not trying to gain profits, great 
II. Is it possible to create a more sustainable world using the sharing economy and be profitable
The sharing economy has a marketing problem when sharing makes people consume more
Multiple sharing economy platforms define themselves as sustainable, and many researchers agree on the fact that “the collaborative economy is probably a major step towards more sustainable living at the environmental and social level.” Source. But, can the Sharing economy actually make people consume more? This is important because as we have said in other parts of this essay, the sustainability problem is linked to overconsumption, it would be bad for a model that tries to make us more sustainable to actually make us consume more. In 2014, 75% of the French population had bought at least once an item from a peer-to-peer platform. Source. It would seem at first that platforms like eBay, craigslist and Leboncoin enable users to give a second life to things that would otherwise be not used or just thrown away. In the paper “Sustainability of the Sharing Economy in Question: When Second-Hand Peer-to-Peer Platforms Stimulate Indulgent Consumption” Source, the authors argue that P2P platforms that sell second-hand items actually push people to buy more things online, while making the consumer think that they are “saving” the environment. They add “It appears that far from encouraging frugality, these [Peer to Peer platforms] are the ultimate places inducing indulgent consumption.” eBay has more than 1.3 billion active listings on its platform and has 182 million users, while eBay started as a marketplace for used products, the first product sold on the platform was a broken laser pointer, users quickly started using the platform to sell brand new items. In other words, 80% of listings are for brand-new items (that’s around 1 billion listings). Used items do get sold more often than new items, 50% for used and 33% for new but this is a statistic for the whole site, if we look at the US sell-through rates are 56.3% for new items and 39.8% for used items. This shows that the type of buying behavior changes depending on the country. Source. Another platform that is interesting to look at is Airbnb, which has often been criticized for multiple reasons, (helping the creation of illegal hotels, destroying tourist locations, forcing people out of their homes…) the platform has often presented itself as a way for homeowners to share an extra room they have in order to make extra money. In reality, almost 70% of listings on Airbnb (according to an analysis of 5,000 listings in San Francisco) are entire homes or apartments, on top of that around 30% of hosts own multiple listings. This shows that many of these “hosts” seem to be a lot more like old fashion landlords than “collaborative techie sharers.” Source. Uber is another example that needs to be presented, does car sharing reduce traffic thus reducing pollution, or does it increase traffic? Uber has been open about presenting its services as an environmentally friendly alternative to using your car, especially when using the carpool option. Uber has on their website “More people in fewer, more efficient cars can mean less environmental impact per person” Source. But according to a report by the Euromonitor for European research and campaign group Transport & Environment tells us the opposite, the surge of platforms like Uber and Lyft correlates with the surge in air pollution in European cities. The report also shows the increased registration of cars for car-sharing apps, for example, since France opened the “taxi” market in 2015, the number of private hire vehicles (PHV) has doubled in 3 years, from 15,000 in 2016 to 30,000 in 2019. In London, we can see similar data where the number of Uber also doubled during the same period (25,000 to 50,000), which represents half the PHV in the city. Overall, the number of vehicles increased by 26% since Uber arrived in London, “This data strongly correlates with a 23% increase in overall CO2 emissions for the taxi and PHV sector in the UK in the same period,” Source. The report also explains that the CO2 emissions from Uber services “could be as high as half a megatonne of CO2. This is equivalent to adding the CO2 emissions of an extra 250,000 privately owned cars to the road.” Source.
Many sharing economy platforms promote themselves as “green” as most of them argue that their services enable people to have access to underused goods (Uber for cars and Airbnb for empty rooms) but because of the way these platforms are designed, they actually make their users consume more. While it is hard to argue that these platforms are not part of the sharing economy, it is easy to see how they are contributing to overconsumption because of the way they are designed.
Examples of successful, profitable sharing economy platforms and models that are sustainable
BlaBlacar, Couchsurfing, Fat Llama, Vinted, Spinlister, LeftoverSwap (which doesn’t exist anymore), Turo, and Streetbank are all examples of platforms that help us become more sustainable. Some of them are more profitable than others, but they all manage to connect people to better utilize underused goods. BlaBlacar has been valued at over a billion Euros, but it doesn’t mean they are profitable, it is hard to find how much revenue they are making but estimates are around 88 million euros in 2015. Source. According to a Forbes article (Source), BlaBlacar has 80 million members in 22 countries (2019). At the time the article was published in August 2019, 50 million people had already traveled with the app, which is 2,5x as much as British airway, another great piece of data is that in 2018, Blaclacar has saved 1.6 million tons of CO2 which is more than the entire road emission of a city like Paris. On their website (Source), they add that they also helped save half a million tons of oil (the equivalent of lighting the entire of Los Angeles for 1 year). One of the main reasons BlaBlacar is able to save that much is that they don’t push users to use more their car, they just help people to fill up empty car seats for rides that would be done either way “The average car occupancy rate in Europe is 1.7 people, whereas a car in our community has an average of 2.8 people.” This shows that the sharing economy, when used in a way that truly utilizes underused items, can really be beneficial for the environment. Vinted (Source) is another great example even if they do much less profit (revenue of 14 million in 2018), they are the biggest “pre-loved” fashion marketplace. The Fashion industry is extremely polluting and the app gives the possibility to its users to sell and exchange old clothes they owned. In 2018 they had 4 million monthly active users, the idea on the platform is that you exchange items, where Vinted takes no commission but just acts as an intermediary, or you can sell and buy clothes in which case Vinted takes a small fee. This is a great way to operate the app as they could have forced people only to sell and buy in which case they would make more profit. Street Bank is a great example of a nonprofit sharing economy platform, it works by creating small communities based on your neighborhood where it is then possible to share with your neighbors. This is a much smaller platform (only about 20,000 users) but it follows the true ethos of the sharing economy. Source. Different models of the Sharing economy can also be used by “traditional” companies to be more sustainable. The Product-service system is a model that fits under the “sharing economy” term, it is when a company offers a mix of products and services, for things that usually only be sold as products. Michelin has been used as a case study multiple times to show the product-service system, Michelin started selling kilometers instead of tires. Michelin is the biggest manufacturer of tires in the world with an 18% market share, and in 2000 Michelin stopped only being a tire manufacturer to be a service provider, by doing this they removed the pressure and the upfront costs the truck companies had to endure before. They started to use IoT and sensors in the truck to collect data about “fuel consumption, tire pressure, temperature, speed, and location” Source, by using all this data, they were able to share relevant information with drivers and companies in order to improve fuel consumption, thus costs (“2.1% reduction in the total cost of ownership and 8 tonnes in CO2 emissions” per year). This new model forced Michelin to create better tires that last longer (higher quality products) as they now sell kilometers with services instead of tires.
Final thoughts and conclusion
The sharing economy is a great buzzword for many startups and companies to look “green”. As we have seen in the paper, it can have both negative and positive impacts on the environment. Even if it is not in the Ethos of the sharing economy to seek profit, it still is an important thing for many companies and we have seen that it is possible to create a profitable sharing economy platform that is sustainable. It all depends if the company and consumers want to actually be sustainable or just want profits. There is a need for companies to be more transparent about their impact on the environment so that consumers can make better choices. A lot of the success of the sharing economy as being sustainable will come from people’s will to consume less, share freely, and use these digital tools that can help to make our communities better.