Regulations and strict implementation of policies can help take advantage of innovative business models such as the sharing economy.
Have you ever taken Grab, Angkas, or other ride-hailing services to go somewhere? How about renting an Airbnb-listed property for a staycation or travel accommodation? If you have, then you’ve taken part in the sharing economy! It’s a way of creating mutual value for owners and consumers, facilitated using technology.
But what is it exactly, and why is it part of sustainability initiatives? How can “sharing” be a business model?
Circular business model
The sharing economy is an economic perspective where we promote businesses to translate unused assets into an asset with commercial value. Simply put, in a sharing economy, we share our resources with one another. In this economic model, we can lease our unused assets (e.g., car, apartment unit, etc.) to others who are willing to temporarily use them which will maximize our “returns” from purchasing that asset. Of course, this has been reflected in the current landscape of the Philippines where ride-hailing apps have become a norm of daily life.
The sharing economy model offers a lot of advantages for both the asset owners and the customers. From the owners’ perspective, they can profit from the assets they seldom use. From the customers’ perspective, there’s no need to buy an asset that might not be within their means (e.g., having to apply for a loan to purchase a car). The “bigger picture” advantage is that our society will not need to produce new products for everyone since we will be sharing them. In effect, our society will no longer extract additional natural resources. This is where the sharing economy and the circular economy converges: both promote efficient use of resources.
While the sharing economy envisions the sharing of resources, the circular economy encompasses maintaining the resources within the economy and minimizing the extraction and waste. They converge on the thought of better resource management (which is an often-overlooked environmental solution). Managing our resources is important as the Philippines is an import-dependent country. As we move towards sustainable development, better resource management can make our economy more resilient amidst shifts in geo-politics and the global economy. It adheres to sustainable development as we avoid virgin material processing that impacts the environment.
The two economic models are also complementary. To an extent, they are vital to each other. In a sharing economy, assets must be maintained and repaired to ensure consistent delivery of product and/or service. Since the circular economy encourages lifecycle management, this economic model will promote maintenance and repair as a thriving business sector. A circular-service economy has different facets that enable sharing of assets while ensuring their optimal lifetime.
Challenges in sharing economy
The sharing economy, however, has its share of challenges and issues on the social, economic, and environmental fronts.
Drivers in ride-hailing services do not enjoy employee benefits, because they are considered as third-party service providers. No employer-employee relationship exists, and their livelihood is highly dependent on consumer demand, ratings, and prices determined by the application algorithm. Disruptions such as weather disturbances can severely affect their income.
In real estate, offering short-term property rentals to tourists has driven the prices up, so much so that locals can no longer afford to live in the cities where they work. They are forced to stay in neighboring towns, which means longer commute to work. Some locals also complain of disruptions in their daily lives (e.g., noise, traffic jams, and security concerns) due to tourists’ presence. To counter this, some cities have regulated or totally banned offering short-term rentals. Barcelona, a popular tourist destination, recently announced that this practice will be banned by 2029, while Paris limits property owners to offering their space for 120 days per year.
While rental services have been around for a long time, the “sharing” mindset is rooted on maximizing an underutilized asset, while “renting” mindset is anchored on acquiring assets to primarily sell it as a service. With the ongoing popularity of ride-haling services and the absence of reliable transportation infrastructure in most developing countries, car ownership has increased to be used for this purpose. This still results in an increase in material resource use.
It is important to recognize the opportunities and challenges that come along with initiatives like this. Regulations and strict implementation of policies can help take advantage of innovative business models such as the sharing economy. We can only say that the sharing economy is truly “caring”, when it does not compromise the benefits to society.
Dr. Jonna C. Baquillas is an Associate Professor at the Department of Marketing and Advertising, Ramon V. del Rosario College of Business, De La Salle University. Dr. Ivan Gue is the Chairperson of the Department of Mechanical Engineering, Gokongwei College of Engineering in the same university. They are engaged in research and projects focused on circular economy, sustainability transitions, and sustainable consumption and production.
The views expressed above are the authors’ and do not necessarily reflect the official position of DLSU, its faculty, and its administrators.
