A decrease in reputation leads inevitably to an erosion of trust, which may result in customers moving to a competitor, shareholders disinvesting, employees leaving among other outcomes. This trust element of reputation also influences how stakeholders respond to a company’s outreach and engagement activities, such as consultation processes, advertising and public relations.

Utilities have been hit by a number of negative reputational stories of late which have impacted the overall trust in the sector by its stakeholder groups. An example of this was the Daily Mail’s coverage of National Grid’s allegedly inaccurate gas meters which led to millions of customers paying too much for their electricity bills.

The story itself was an old one, but, in tandem with ongoing coverage of Ofgem’s investigation into pricing transparency in the sector, as well as Centrica’s recent profit announcements, this reinforced the impression to the public and customers that utilities are putting profits before people. Future marketing activity in relation to low prices and customer care are likely to have reduced effectiveness against this backdrop.

Elsewhere, the Guardian’s report on leaked documents showing how E.ON, ScottishPower and Scottish Resources Group have been paying a private security firm to secretly monitor activists further eroded trust in the integrity of utilities, this time with a section of the public and NGOs. The spillover potential of this revelation is likely to affect the broader relationship between these specific companies and campaign groups, as pledges to engage in consultation with similar groups will be viewed with suspicion.

It is therefore not surprising that Alva’s analysis shows that trust in utilities dropped significantly from January to February, decreasing from an average score of 6.97 in January to 6.71 in February, the largest decrease recorded for this driver in any sector.

A company’s reputation is built and maintained by the perception of what it says and what it does as well as the alignment of the two. This is the essence of trust in an organisation.

Why this matters is that reputation is the context against which a stakeholder bases his or her attitude towards a company, be that the decision to purchase a product or service, to seek employment or to pay attention to its communications.

The decreasing reputation of the utilities sector is a significant concern because it reveals a broader mistrust in its companies and a reduced potential for engagement with its disaffected stakeholders.

Alva methodology

Alva calculates its reputation scores on a 1 to 10 fractional value basis, which represents the perception of various stakeholders and market segments at any given point in time.

The scores are based on the daily analysis of over half a million news and financial announcements, trading and analyst reports and social media comments.

 

—By Nicholas Chrysanthou, energy consultant analyst at Alva