The ‘sharing economy’ is a relatively new and amorphous term which refers to an economic system built around the sharing of human and physical resources and the shared creation, production, distribution, trade and consumption of goods and services by different people and organisations. Sharing has developed from lending and borrowing between friends and family to new means and models of business enabling millions of transactions each day.
Enabled by the internet and powered by the appetites of millions of micro-entrepreneurs, it is now possible to find people who are willing to rent you a room in their house, lifts in their car, unused power tools or unloved children’s toys, and more, in countries all over the world. Sharing is about finding new utility for underused resources and assets and includes people’s time, ideas and skills. It includes hiring people to come round to assemble your furniture, bring you food or queue up for tickets for the latest West End show. Sometimes for a price, sometimes in exchange for something less tangible. For example, deprived dog-lovers can now easily make themselves available to busy dog owners for walking duty or dog sitting, in exchange for the simple pleasure of having some canine companionship. For many, sharing is also about a culture and value shift towards a more connected, collaborative, community-oriented sustainable society.
Sharing puts excess capacity - The People Who Share estimate that there are over £3.5 trillion worth of idle assets globally - to use. Since 2009, there has been a significant growth in specifically designed peer-to-peer networks where collective resources can cheaply and easily meet collective needs, and where the desire for access trumps the desire for ownership. People and businesses are now able to trade and share their idle resources and human skills and knowledge with other people and other businesses.
Sharing has grown rapidly as commerce has moved onto the internet and smartphones in particular. Many sharing economy businesses have started up to link those people who want to be on either side of a deal together. In the UK transactions reached £7.4bn in 2015 up from £3.9bn in 2014. PwC believes that globally the value of the sharing economy could top an astonishing £335bn by 2025.
Sharing, borrowing and lending have always existed within societies. However, it is the confluence of contemporary megatrends such as the digital revolution, urbanisation and resource scarcity which have heralded their transformation. Its benefits are varied. With linear models of production and distribution seemingly incompatible with the planet’s finite resources, releasing surplus capacity (idle assets) into the economy is compelling from an environmental perspective. Economists would also assert the benefits of increased efficiency as a result and, although evidence is thus far inconclusive, downward pressure on prices.
Benefits of sharing can be categorised in three broad ways:
- On a financial level, underused resources can generate supplementary income for their owners. Once there is a market for it, ‘waste’ can be viewed as a resource in the wrong place, generating revenue for the vendor as opposed to waste disposal costs. Where goods and services cost nothing (or much less) as they are already produced/available, they can be sold cheaper and save purchasers money, whether they are businesses or individuals.
- On an environmental level, trading idle resources and promoting access over ownership means that less raw materials needed to be extracted, processed and transported, less manufacturing occurs, less waste is generated and less greenhouse gases are emitted. Waste is diverted from landfill to those who can put the previously wasted resources to good use
- On a social level, sharing also creates new networks and relationships between people and can foster greater trust within societies. Furthermore, by having a more collaborative culture within organisations, efficiencies are greater and staff enjoy increased well being. The correlation between increased sharing and well being leads to healthier, more connected and sustainable communities, according to Cooperatives UK 2011 study: The Great Sharing Economy.
For businesses, the growth of the sharing economy has enormous implications. Now people can trade directly with other people (peer-to-peer), they are less reliant on traditional businesses for their goods and services. This has led many traditional companies to re-imagine their business models and identify new opportunities, and for entirely new business organisations to emerge.
Further, evidence suggests businesses which have a more collaborative culture are more profitable: they enjoy roughly 10% increases in revenue (according to a 2013 report from The Economist), increases which are expected to rise significantly further in the coming years. A 2014 study by Deloitte on collaboration within business highlights the strategic importance of sharing, finding companies that prioritise collaboration to be twice as likely to be profitable and outgrow competitors, and five times more likely to attract employment. Embracing sharing can increase workforce productivity, corporate acceptance, and customer authenticity, while ignoring it may eventually turn those very same customers into competitors.
Notwithstanding, the emergence of the sharing economy has also caused disruption and controversy. Two of the most remarkable new players are US based sharing platforms, firms which have attracted hundreds of millions in venture capital funding and multi-billion dollar valuations. Uber enables people to hail taxis using their smartphones and turns car owners into taxi drivers. Airbnb is the world’s leading hub for renting spare rooms.
Both firms stand accused of riding roughshod over the rules and regulations which incumbent businesses must adhere to. In some countries, existing taxi drivers and minicab firms have protested that Uber drivers are unskilled, unqualified and inexperienced. In others, criticisms have ranged from the loss of drivers' autonomy, fare erosion and lack of transparency on tips. Incumbents from the hotel industry and those offering traditional bed and breakfast accuse those renting on Airbnb of avoiding health and safety regulations (e.g. providing fire escapes), breaking sub-letting agreements and preventing the collection of tourist taxes.
As firms such as these grow bigger, some observers question whether they have distorted the true meaning of sharing, arguing that they turn everyone into micro-capitalists, generate enormous returns for their shareholders and end up behaving much like most other large, profit-driven corporations. As a result, it is increasingly likely that actors within the sharing economy will be expected to explain if and how they are motivated by any social, environmental or ethical considerations or beliefs.