How Can Utilities Overcome Their Trustworthiness Problem?

[We’re pleased to welcome authors Dr. Wojtek Przepiorka of Utrecht University and Dr. Christine Horne of Washington State University. They recently published an article in Organization & Environment entitled “How Can Consumer Trust in Energy Utilities be Increased? The Effectiveness of Prosocial, Proenvironmental, and Service-Oriented Investments as Signals of Trustworthiness,” which is currently free to read for a limited time. Below, they reflect on the inspirations, and findings of their research:]

The electricity industry is a significant producer of carbon emissions; it needs a makeover in order to provide clean, reliable, and efficient power into the future. For this new, “smarter” grid to produce the gains it promises, consumer engagement is key. But consumers will only participate if they trust their utility company. Our research addresses the simple but important question of how consumer trust in utility companies can be increased. What can utilities do to convince consumers that they are trustworthy?

The literature on corporate social responsibility and signaling theory, help to address this question. Corporate social responsibility suggests that when companies behave in ways that respect ethical values, people, communities and the natural environment, customers respond positively, in turn increasing company success. Signaling theory asks when a company’s actions (for example, its efforts to be socially responsible) communicate that the company truly has some desirable but unobservable properties (for example that it is trustworthy).

We test whether socially responsible actions by utilities – in particular, prosocial, proenvironment, and service-oriented investments – signal trustworthiness to consumers. We use online survey experiments to test our hypotheses. Population based survey experiments, so-called vignette experiments, have two advantages: (1) random assignment of participants to experimental conditions allows for isolation of causal effects, and (2) survey experiments can be run with representative samples of the population of interest, thus allowing for generalizability of results.

We find that utilities’ proenvironmental investments – their investments in renewable energy – have the most consistent effect on consumer trust. For Americans generally, a utility’s efforts to provide better customer service or to contribute to their community, have little effect. Moreover, consumer trust is the main predictor of these consumers’ willingness to use smart grid related technology.

Utilities are in the news for advocating measures that make installing solar panels more difficult for residential customers. Our findings suggest that utilities’ lobbying efforts that appear to undermine use of renewable energy may have the unintended consequence of reducing consumer trust and feeding anti-smart meter, anti-utility activism. More generally, our findings suggest that consumer trust in utilities is more fundamentally hampered than just by the quality of the customer experience. Instead, trust rests in part on consumers’ assessments of utility commitments to renewable energy.

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