Green tariffs ‘no longer enough’ to show eco-credentials

Energy retailers must do more to differentiate their green credentials or risk losing out to competitors, research from EY has found.

A survey of 2,000 customers by the consultancy found Covid-19 had accelerated the willingness of people to choose more sustainable products, with 62 per cent more likely to purchase a product or service that is sustainable.

EY says its research reveals that while these changing attitudes present an opportunity for energy companies, they also bring risks. Almost a third of respondents (32 per cent) said they had stopped using a product or service because it was non-sustainable.

Additionally, a “small but significant” proportion of consumers (12 per cent) said that their primary reason for switching supplier was for sustainability-related reasons – three times more than for customer services-related issues.

EY said with so many energy suppliers now offering green tariffs, companies must do more to show customers they are sustainable across all business activities or risk losing out.

Rob Doepel, EY energy leader, UK and Ireland, explained: “With sustainability now at the top of the government’s agenda, a mainstream concern in the home and a key driver in purchasing decisions, energy companies need to demonstrate their green credentials clearly. But with many suppliers already providing green tariffs, this is no longer enough to differentiate companies from the competition.

“Energy companies need to catch the attention of consumers by clearly demonstrating an intrinsic commitment to sustainability across all their activities, not just specific products in isolation, or risk losing those customers to more sustainable competitors.

Doepel added that energy companies are in an “acute period of transformation” as they seek to become net-zero leaders while simultaneously experiencing cost and margin pressures.

He continued: “However, persuading consumers to adopt more sustainable behaviours and pay a green premium for more sustainable products and services may not be such a big task as anticipated.

“Investment in more sustainable offerings can, rather than merely adding costs, actually generate returns through higher margins. Being able to differentiate themselves in an increasingly commoditised market offers energy suppliers a powerful opportunity to stand out from their competitors.”

Younger consumers willing to pay more

Elsewhere, the research found that sustainability is now a vital factor influencing younger customers’ purchasing behaviour. More than two-fifths (42 per cent) of under 35s were willing to pay a premium for a sustainable home energy supplier, falling to 26 per cent for over 35s.

Of all respondents, 42 per cent said they would like to buy sustainable products and services from an energy supplier, ahead of providers from other sectors such as tech companies and retailers.

Supporting local generation

Almost two-thirds of consumers said they prefer to purchase products and services from local suppliers and 63 per cent indicated that the pandemic made them more aware of supporting local communities.

This trend translates into purchasing energy, with more than three quarters (76 per cent) indicating that they would rather buy and use sustainable energy generated in their community.

More information on how to use less energy

Almost 70 per cent said they wanted to use less energy for heating and appliances over the next five years but do not always know how to, with a key reason being lack of information.

Nearly half (49 per cent) of respondents said they lacked information when purchasing appliances and one-third experienced the same challenge when it comes to choosing a gas or electricity supplier.

More than half (55 per cent) also said that they want a better way to gauge the impact of their behaviours, with the same percentage stating that they would like to understand their individual carbon footprint.

Another barrier found by EY is the perceived complexity of switching supplier, with 51 per cent saying they would switch to a sustainable energy company if suppliers made the process simpler and easier to understand.