#17_ Platforms vs. sustainability: The winners take all and everything is lost?

“Platforms” and “sustainability” are two words rarely found in connection with each other. Although, in theory, platforms bear a potential to facilitate business development towards more sustainability by reducing ecological footprints of products and services or by lifting the standards work and employment, platforms are often criticized for being part of the problem rather than part of the solution. This begs the question: Are the currently dominating platforms sustainable? And if not, could platforms ever be managed sustainably?

Undeniably, the dominant platforms are extraordinarily successful under the current conditions of market regulation: US- and China-based platforms venture towards prolonged economic success, indicated by the outstanding – if not perverse – stock market performance of the leading platform firms (for an overview s. Original platform fund, 2021). These platforms dominate software development, media, and online retail as the winners who take it all (Gawer, 2021): the strongly expanding e-commerce firms, the fast-growing parcel and food delivery providers, ride-hailing services, and the ever-present cloud software firms fuel projections on how digital platforms disrupt the economy (Vallas & Schor, 2020; Wu & Gereffi, 2019; Srnicek, 2017; Vulkan, 2003). Once launched successfully, these platforms appear as unbeatable. This is because platforms bring together organizations, workers, and consumers for a common purpose or to share a common resource by introducing novel ways of exchange and allowing exponential expansion in utility and value for those using the platform (Cusumano et al. 2019). Due to a cultivating of network effects by digital organizing, platforms facilitate exchange between consumers and sellers, increase the scope, volume, and speed of transactions, fasten information processing, and bring relative labour cost savings. Beyond the core of the digital economy, the platform strategy has already permeated value chains in many industries. These industrial platforms are groupings of firms around an orchestrator such as a core client firm. The clients draw various services or products from their suppliers, manufacturing firms and service providers, as well as complementors on different scales by subcontracted management functions and operations. And where service providers, self-employed, other organizations, and even customers collaborate along the value chain to combine their various resources and competencies, the stage is open for the intermediaries, i.e., platforms such as the lead firms, brand retailers or digital platforms.

However, concerns are rising about whether currently dominating platforms – digital and other – are socio-ecologically bearable for societal stakeholders. Platforms’ negative network externalities – the social and environmental costs platforms produce but do not pay for – as well as the “hidden injuries” and “moral injuries” coming along with their business practices (Hill, 2020) pinpoint their questionable sustainability record. In many regards, platforms dramatically accelerate exactly those very processes that jeopardize ecological survival, and come at a high cost for workers on the ground. It is an open question whether and how the dominant platforms assist societies in finding responses to the looming ecological crisis under the constraints of planetary boundaries. This is a fundamental dilemma, because of platforms’ extreme attractiveness in business terms as well as their potential for future dominance. If platforms cannot become sustainable, it will be extremely unlikely that societies find appropriate answers to urgent social problems of which the climate crisis is for many the most pressing one.

If one screens the debate for finding orientation on whether platforms perform sustainably, the mainstream views still seem to be separated into two parallel worlds leaving a large gap (for exceptions see Folke et al., 2020; Kolk & Ciulli, 2020; Verboven & Vanherck, 2016): Where sustainability is discussed for altering business strategies, the idea that platforms challenge a business world dominated by the large integrated, hierarchical bureaucracy is rarely reflected upon (Davis, 2013). Neither in terms of how this trend might erode traditional modes of regulating private business towards sustainability nor with regards to the potentialities of fostering collaboration and collective solutions to solve current sustainability problems. And where platforms are dealt with explicitly, the profound sustainability challenges emanating from platforms are rarely present. As a result, in many relevant areas around labour or environmental standards as well as socio-cultural rights, platforms escape the scrutiny they deserve for their sustainability. Unsurprisingly, initiatives for pushing platforms towards sustainability, either through the law or indirect incentivizing, are often in a stalemate.

But what does sustainability of platforms mean? In principle, a sustainable organization seeks to make the production of wealth socio-ecologically bearable, preserves and develops human and environmental resources, and deals with unavoidable tensions and conflicts by dialogue and collaboration with internal and external stakeholders to meet organizations’ current as well as future performance goals (for related views see Kolk & Ciulli, 2021; Hahn et al., 2015). Organizations’ performance goals are understood as including societal benefits and ecological survival, but also reasonable profitability for all sorts of “capital”. In other words, organizations become sustainable if they ensure the regeneration and reproduction of resources, not just by exploiting these resources for economic gains (e.g. Hahn & Tampe, 2021). For businesses, the latter implies an orientation towards the long-term economic viability of productivity and value creation embedded in a broader socio-ecological context from which social resources and capabilities are borrowed. For workers, such a sustainable organization respects the long-term preservation and renewal of individual capacities, fosters the development of individuals, supports dialogue and collaboration, and aims for the improvement of labour standards. Of course, such an idea of sustainability includes a rethinking of organizational forms and governance arrangements and experimentation with traditional alternatives such as cooperatives and associations, or with newer arrangements such as the B-corporation. From such a perspective, it becomes highly questionable what – if anything – the currently dominating platforms contribute to sustainability.

Economic sustainability?

Whether platforms expansion is sustainable economically in the long run is an open question. On the one hand, the platforms’ current expansion does not seem to end any time soon, because of technological advances such as cloud computing, machine learning, blockchains, collaborative robotics, and the ‘‘internet of things’’ (Breznitz et al., 2011; Brynjolfsson & McAfee, 2014; UNCTAD, 2019). In addition, an increasing demand for the respective services in more markets creates a positive feedback loop for platforms’ commercial attractiveness as well as consumer utility and value (Culpepper & Thelen, 2020). However, despite their superior stock market performance, many platforms are not profitable in terms of traditional accounting standards. Many platforms heavily invest in kicking-off a path of prolonged expansion which is a highly risky bet on the future. Even more so, as the dissemination and permeation of platforms throughout the economy tend to undermine directly or indirectly the preconditions of their further growth in the long run (e.g. Fleming et al., 2019). Platforms undermine themselves by increasing the costs of local collaboration and limiting societies’ capacity for providing public goods and investing in public infrastructures. This is a profound strategic dilemma for platforms. Why? Because platforms have a strong relational or “network” dimension. And the networks platforms orchestrate have a multi-sided or multiplex character, i.e., they consist of a multitude of relationships with a variety of parties (buyers, sellers, complementors, facilitators, observers, etc.). In other words, platforms competitive advantage resides in the value capture from networks. Rather than being concerned with value creation as such, i.e., the producing of an exchange value through own performances and the delivery of self-made products and services, platforms cultivate, appropriate, and redistribute value created by external sources or enabling transactions between other parties.

Hence, platforms need to be inclusive to a broader set of goals to connect with the external sources of the value they capture, be it the workers who create value, the self-employed complementors who enhance the platform’s value by providing complementary goods and services, the communities where resources are extracted, and others. Rather than “sharing” their abnormal profits, however, the dominant platforms seem to continue with hoarding opportunities – “opportunity hoarding” is a term borrowed from Tilly’s (2005) account on inequality – for value capture around monopolized infrastructures. For example, there are signs of severe market failure as the large platforms engage in vertical and horizontal integration (Khan, 2017). One example are the repeated allegations that platforms charge vendors and complementors undue additional fees. Exploitative hoarding may backfire to the extent that an over-stretched privatization could lead to an over-prized procurement or under-consumption of, access restrictions to, and under-investment in the procurement for quality services everybody needs. This holds especially for platforms in their transaction variety, i.e., intermediaries for which the number of users is a function of services offered and reputation attractiveness, but also – albeit to a lesser extent – for innovation platforms, i.e., those built around a shared technology that allows innovating of complements (Cusumano et al. 2019). If platforms dominate through hoarding opportunities for tapping into external resources and innovation capabilities, the question for their sustainability is: But, what if these external sources dry up?

Social sustainability?

Where platforms thrive on exploiting the resources provided from public infrastructures, workers, and the environment, the sustainability gap becomes particularly visible. The platform strategy bears multiple social risks from work-related and legal aspects to cultural and social-psychological issues. Despite expectations about platforms’ potential for social benefits, inspired by their business performance as well as new technological possibilities, there are many reasons to be more cautious, especially regarding work and employment in and around platforms (e.g., Choudary, 2018; ILO 2021). For example, positive expectations center around an increase in individual autonomy by a new realignment of work and life ending the separation of the family household and the workplace through electronically connected and online modes of remote and mobile working. However, the findings are mixed and serious doubts are justified whether those groups of employees benefiting from such a potential just belong to the “happy few”.

In contrast to any high expectations, for many platform workers individual autonomy is endangered through algorithms invading the life world and conquering non-working time. For others, platforms contribute to what has been called the digital sweatshop (e.g., Alimahomed-Wilson & Reese, 2020). Many platforms enact the scalability and flexibility of their operations along the global value chain through work arrangements that segment workforces. In other words, platforms shift the burden for adaptation towards the more precarious workforce segments like agency workers, temporary and part-time workers, self-employed individuals, and contractors (e.g., Chan et al. 2020). At the same time, traditional employment is put under pressure as certain jobs and roles lose their relevance or occupational status, unlikely to be offset by new types of work such as self-employed online vending, for example. Last, but not least options for independent voice, union organizing, and collective bargaining tend to be low in and around platforms. To a certain extent, a polarisation in work and employment is the signature of the platform economy.

Ecological sustainability?

The ecological impact of platforms is also controversial. On the one hand, certain platforms provide solutions for decentralized energy exchange or digital monitoring of electric grids and energy consumption. Also, platforms provide support for the exchange of environmental agencies and regulators. On the other hand, the operations of physical infrastructures through platforms may undermine the implementation and enforcement of certain regulations. Of course, this also is caused by the problems on how to define and measure the sustainability performance of businesses more generally, but platforms also add to this with their own ecological footprint. First, platforms’ energy consumption in their technological core, i.e., server farms and grid technology, has direct and indirect effects. Directly, about one percent of the global electricity consumption goes into servers and data centres, likely seeing a sharp acceleration during and after the Corona pandemic through cloud computing, new grids for mobile data exchange and blockchains (Shehabi et al., 2016; Knight, 2020, for Germany Hintemann, 2018).

The indirect effects are likely to be even more relevant as platforms, especially those of a transaction variety, mobilize a large amount of energy consumption for arranging the flow of physical goods, leading to “rebound effects”, i.e., increased energy consumption despite certain operative efficiencies in single processes (Verboven & Vanherck, 2016). Studies have illustrated how this already starts at the base of the pyramid where the minerals are extracted that enter the products that are needed to keep the digital value machinery circulating (Crawford, 2021). Indirect effects also extend to the increased traffic and land use for transporting, sorting, and storing the goods along the chain as well as delivering the goods to end consumers. For example, German traffic statistics show an increase in transport emissions from 2010, indicating that climate goals in this area are out of reach currently (Umweltbundesamt, 2021). Hence, the indirect energy consumption and material resource extraction accelerated through platforms emphasizing speed and convenience contradict proclaimed net-zero carbon emission policies (e.g., electrical fleets) in sustainability reports.

All in all, the currently dominating platforms seem to be incompatible with sustainability, despite their potential for contributing to a more sustainable business world. As preliminary as this assessment can only be, it’s worth mentioning that there is a host of other issues that question the dominant platforms’ sustainability. For example, platforms are criticized for circumventing legal accountability for paying taxes, product quality, or contract risks by remote and distributed work arrangements. Also, the hopes that platforms offer universal access to information and thereby contribute to more transparency have been frustrated. In contrast, rather than democratizing the cultural reproduction of society, information captured by large platforms endanger individuals’ information sovereignty, especially by manipulating consumers and manipulating interest articulation in the public debate (e.g., Zuboff, 2019). Inasmuch as platforms are incapable or unwilling to take profound responsibility beyond greening self-selected aspects of their business processes, they are likely to remain a part of the problem. In continuing the exploitation of network-created hoarding opportunities and pushing for ever-increasing volume of items transported longer distances with higher speed and energy consumption around the globe (Hesse, 2020; Brix-Asala et al., 2016), the limitations of platforms in sustainable management are profound. Nevertheless, the debate around the “sharing” economy shows a glimpse of what a platform strategy bears in potential for collective solutions and alternative organizational arrangements (e.g., Davis, 2013; Charles et al., 2020; Schor & Attwood, 2017). Examples are the Benefit (B) corporation or social enterprises (e.g., Hiller & Shackelford, 2018; Bauer & Umlas, 2017; Ridley-Duff & Bull, 2021). However, whether these hopes can materialize in unfettered competition with the dominant platforms is far from certain. From a perspective of labour standards and workers’ rights, intelligent regulatory interventions providing institutional support for sustainable platforms are in high demand. Even more so, because they may contribute to resolving the tensions around an inclusive and just transition (Skjolsvod & Coenen, 2021).

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