Urban Sustainability and the Sharing Economy
Sustainable urban living requires energy efficient buildings, smartgrids, mass transit, and green spaces—but it also seems to be evolving a new approach to owning and using resources. A growing aspect of sustainable urban living is the “sharing economy.” Sharing has always been a part of urban life; we have long shared books in public libraries, nature in parks, and seats on the stoops of row houses. But in the past few years, cities have seen a significant revival and acceleration in sharing activity and innovation. In cities around the world, people are now welcoming guests into spare rooms, sharing tools and equipment, and paying for rides in cars of people they don’t know. Start-up businesses are sharing computing space in the cloud and leasing office space and conference rooms by the hour. The sharing economy is growing as young people and a few older folks decide that access to cars and other resources is more important than owning them.
The size and scale of leading companies operating within the sharing economy, most of which didn’t exist a decade ago, now rival some of the world’s largest businesses in transportation, hospitality and other sectors. By using innovative technologies and creative business models, and even redefining concepts of equity and safety, the sharing economy is starting to change our cities and our lives.
Cities have many resources that can easily and effectively be redistributed and shared. By allowing people to own less and consume only what they need, fewer resources are wasted, promoting urban sustainability. The sharing economy can lead to more sustainable consumption while remaining compatible with economic growth. The impact of these resources on quality of life makes the traditional measure of GDP an inadequate surrogate measure of economic well being. GDP measures the volume of economic life, not its efficiency or effectiveness.
However, sharing economy services have also presented cities with unprecedented and complex questions of governance. The greatest challenge for cities is finding a balance between embracing these new businesses, as well as the various benefits they offer to residents and visitors, and regulating their safety and quality. With more types of sharing businesses entering the market and the rising popularity of these new applications and services, city leaders have been forced to address a variety of issues all at once:
- How do you ensure that those sharing their home and other resources do not discriminate on the basis of race?
- How do you ensure that an Uber driver or similar service provider is not a criminal?
- How are consumers protected against “lenders” sharing defective products and services?
Despite these issues, the popularity and growth of the sharing economy has been rapid and dramatic. Two of the best-known companies within the sharing economy are Airbnb and Uber. Both companies have achieved success by enhancing access to two of the largest assets people have, their homes and their cars. Airbnb is now valued at $25 billion, rivaling large hotel chains, while Uber is valued at $65 billion. Their growth is rapid and impressive.
The sharing economy, or collaborative consumption, is a way of “renting” resources owned by one individual to be accessed by many other individuals. It is a system built around the utilization of unused or under-used resources. The modern sharing economy dates back to the 1990s with the founding of online marketplaces eBay and Craigslist, which allow for the recirculation of goods. But today’s sharing economy looks slightly different, fueled by information and communication technology and the proliferation of web-based communities.
The rapid growth of these peer-to-peer platforms has been enabled by innovations in technology. Technological innovations have streamlined entry into the market for suppliers, facilitated easy access to searchable listings for consumers, and kept the costs of doing business low. As a result, sharing goods and services is cheaper and easier than ever before, and possible on a much larger scale. Before the internet, renting a good or space from someone else was feasible and common, but rarely quick and simple. Now websites match up apartment owners and renters; smartphones with GPS let people see where the nearest rentable car is parked; social networks provide a way to check up on people and build trust; and online payment systems handle any billing. Just as YouTube changed TV and social media disrupted the mainstream media, the sharing economy replaces the industrial model of companies owning and people consuming, and allows everyone to be both consumer and producer.
The sharing economy has emerged as a way for people to utilize an item or service without having to own it. The idea of ownership is changing – today’s young people don’t always see ownership as an advantage, like their parents did, but sometimes as a burden. Millennials (perhaps out of necessity) sometimes prefer a lifestyle with fewer possessions. We’re moving away from a world organized around ownership to one organized around access to assets. Instead of showing off possessions, people now want to show off the places they’ve traveled to and the experiences they have had. The explosion of virtually free digital photography and web-based communications (texts, calls, Skype-like interaction) are evidence of the exponential growth of experiences that are increasingly shared.
The sharing economy allows people to spend less and still have quality experiences. In some cases, it even allows them to gain access to new services they wouldn’t have been able to afford previously. This new trend of ‘disownership’ gives individuals and families more choice, and opens the door to a more efficient and varied lifestyle.
A growing concern about climate change and sustainability has made the sharing economy an appealing alternative for environmentally conscious consumers. With sharing, less energy is needed for transportation and production of goods, and less waste is created as everyday products and services are shared among a group of people.
While some cities are embracing the technology, innovation and new business models that the sharing economy brings, others are resistant to change, or have concerns about the safety and quality of these new services that aren’t regulated under the same conditions as traditional services. The biggest challenge to cities is regulatory uncertainty. The explosive growth of the sharing economy has led to regulatory and political battles in cities all over the world. Governments do not currently have a strong regulatory framework to govern these new services. Regulating the sharing economy is challenging because existing laws were developed without considering some of the issues presented by a less formal, more dynamic model of production and consumption. These new types of companies do not fit industry regulations perfectly, and sometimes operate outside the law.
Critics, such as yellow taxicab drivers, landlords, and hotel owners, argue that high tech competitors do not have to follow the same rules they do and can cut corners and underprice them. Proponents of the sharing economy consider these old-line businesses more interested in protecting their vested interests than serving customers.
Cities trying to regulate the sharing economy are forced to respond quickly, with little time or opportunity to develop an effective response, sometimes enacting legislation without substantial stakeholder participation. Policymakers are often under pressure to permit the services their constituents value while also ensuring safety, fairness, and the best interests of the community.
My view is that the sharing economy is here to stay and will continue to grow. It will require regulation and rules of the road—and those laws will evolve. The free market will need to adjust to the community’s need to protect itself. These new businesses are exciting, and like all businesses will have winners and losers, but any form of consumption that enables use while reducing resource depletion is a contribution to the transition to a renewable, sustainable economy.