3 minutes reading time (579 words)

Trust: on tap and down the pipes and wires?

It’s an old adage that trust is hard won and easily lost.  But what does this mean in the energy and water sectors?  Sustainability First’s lead associate on the New-Pin project, Sharon Darcy, summarises a major new policy paper and the Network’s February workshop on trust and confidence in energy and water.

Trust is a relational concept.   Based on an assessment of ability, motivation and integrity, it is built up over time.  It is not something mechanistic or transactional that can be dictated or reset at the behest of a single actor. In energy & water, trust is built on a complex web of dynamic relationships between consumers / the public, companies, investors, government and regulators.  There are strong inter-dependencies here.  Problems with trust in one area can have knock-on impacts on trust in the ‘system,’ creating a context where confidence can easily be undermined.

Trust can mean different things to different stakeholders. To have trust in energy and water companies, consumers generally want quality and resilient services and value for money; getting these right first time is important.  Given the long-term social and environmental impacts the sectors can have, the wider public may also expect a voice in these services and the systems that they are part of.

People understand that problems with services can sometimes happen. How companies and others respond to events is key.   Being proactive, open and honest in the face of unplanned disruptions, for example, can actually build trust between companies and customers.

If service providers handle these things badly, however, the public may take a greater interest in ‘aggravator’ factors such as lack of choice or poor market behaviour.  Whilst competition can help build confidence by putting a downward pressure on costs, the complex disaggregated value chains in energy retail markets, for example – and different views on profits and costs – can erode trust.

Downward spirals of trust can occur, particularly if regulators are not seen as standing up for customers through prompt enforcement action.  Questions about the legitimacy of regulatory frameworks may follow.  In this context, negative media coverage of issues around services can quickly translate into concerns around wider issues of ‘fair play’ such as corporate tax arrangements, executive remuneration or company ownership; the resulting political risk increasing market instability and reducing investor confidence.  If the costs of borrowing go up as a result, and long-term investors see the sectors as less attractive, it can make the task of delivering value for money services all the more challenging.

Faced with such a prospect, what can be done to ensure that energy and water services are judged trustworthy?  An essential first step is for companies to own their own problems – through engaging with stakeholders so that they can deliver the outcomes that consumers and the public want.

Individual companies - plus the sectors as a whole - showing leadership, through a strong ethical culture and long-run vision, can help create upward spirals of trust.  Companies proactively sharing information and collaborating with regulators and other stakeholders can add to the positive. Clear long-term narratives and consistent signals and behaviours from regulators and government can also help, establishing an environment that is attractive to responsible investors and where innovation can flourish.

There are no silver bullets here.  An holistic and coherent approach is needed by all stakeholders if trust is to be built and maintained.  Getting the right processes in place in the round is crucial if confidence is to be sustained.

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