A question of integrity: energy sector ethics more important than ever
Reputation and trust are becoming increasingly important to brand value, and companies which ignore this fact leave themselves open to serious reputational and commercial harm, says Chris Cullen, head of sales and marketing at Echo Managed Services.
We have seen a seismic shift in consumer behaviour in recent years. No longer satisfied with a company that just offers an efficient service and competitive price point, a growing number of consumers also expect – even demand – that businesses follow a strong code of ethics. From addressing environmental concerns to a providing a transparent billing system or giving back to the local community, it’s becoming more important than ever that organisations do good as they go, as well as providing value for money and good service.
Indeed, estimates suggest that 66 per cent of consumers are now more likely to spend with ethical businesses over others. By contrast, companies that are seen to have dubious ethical conduct are increasingly at risk of losing out as “activist” consumers – those which shun companies with poor business practices – grow in numbers.
What’s more, according to our own research, which looks at how to retain customers in a world of choice, 16 per cent would look to move away from a business they thought didn’t hold the same values as them, or was caught up in a negative headline.
Companies who ignore this fact are leaving themselves open to bear the brunt of serious reputational and commercial harm. The recent Sports Direct scandal is a good example of this; a disastrous failure of ethics which has damaged what was a major UK business – perhaps irrecoverably. The retailer was stung by a litany of allegations surrounding poor working conditions and unethical employee pay in 2016, with thousands of staff allegedly paid less than minimum wage. Profits plummeted by 60 per cent in the months that followed, and the brand name has been left in tatters.
In the energy sector, a number of high profile cases surrounding the sector have caused similar reputational damage. Headlines have repeatedly called out companies causing environmental damage, being fined for poor customer service and even operating unfair and unsustainable customer repayment plans. These issues have understandably led to a lack of trust in the sector. According to a report by Ofgem, only 44 per cent of consumers trust energy suppliers to be fair in their dealings with consumers – a worryingly low figure.
Yet suppliers have made little progress in tackling this image. The rapid expansion of social and digital media means that consumers are now acutely aware of ethical failings and are becoming more discerning when it comes to choosing a supplier.
Historically there was very little that “activist” consumers could do given the monopoly that the big players held over the market. However, the past few years has seen an unprecedented boom in independent start-ups which aim to provide competition to the bigger players. There has been a 26 per cent year-on-year increase in the number of domestic energy suppliers in the UK, many of which have a primary focus on ethical authenticity and seek to actively distance themselves from the industry status quo.
Retain or gain
Take Engie, which offers 100 per cent renewable electricity at no additional cost, or Bristol Energy, a “force for social good” which openly passes on savings to its customers and reinvests profits back into the local community. These principles clearly stand out in an increasingly competitive market when compared to more traditional messaging revolving largely around saving money – at whatever cost.
Should the sector be doing more? Put simply, yes.
Price comparison sites have made switching a relatively straightforward process, and it’s now easier than ever for disgruntled consumers to take their business elsewhere if they feel that their current supplier is not providing a transparent service. Indeed, switching or reviewing household utility or service providers is now viewed as an annual event by a third of consumers (33 per cent).
Whilst it is no secret that price will always remain the most motivating factor for many households who may be feeling the financial squeeze, suppliers need to think hard about how they will retain or gain customers beyond just offering cheaper tariffs or deals. Authenticity needs to be at the heart of this thinking if issues around reputation and trust are to be fully addressed. There are substantial gains to be made if organisations can proactively convince customers that they have their best interests at heart before they choose to switch.
As reputation and trust become more intrinsically linked to brand value, the implementation of a robust CSR policy must never just be a box-ticking exercise, but a concrete commercial consideration. Businesses need to consider that if their customers are now putting more emphasis on ethics, it is something they should take seriously, too.
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