How to use behavioural science to support UK businesses efforts to save water and energy

With businesses across the UK feeling the pressure of the current cost of living crisis, many business owners and managers are looking for ways to save money on day-to-day operations and activities. 

Save water, save money

Businesses in any industry will save money if they manage their water consumption more effectively. At the same time they’ll be reducing their carbon emissions by cutting the energy costs of water treatment and demonstrating solid corporate environmental stewardship. They’ll also be taking steps to be in line with the Environmental Management Standard ISO 140001: 2015.

Save energy, save money

According to research from the UK’s Department of Energy & Climate Change, the average small and medium sized enterprise (SME) could reduce its energy bill by up to 25% by installing energy efficiency measures, whilst at the same time introducing behavioral change. This is especially true for offices and retail spaces. In fact, a recent behavioral science experiment commissioned by E.ON, demonstrated that over the course of a year the efficiency savings in a small office represented enough energy to run 81 laptops for 12 months or boil a kettle nearly 54,000 times.¹

Saving energy can also help businesses achieve the Energy Management Standard ISO 50001: 2018. It’s one of the shorter ISOs and allows businesses to set year-on-year improvement targets for their energy sources such as gas, electricity, LPG and other fuel oils.  

How we can help businesses to save energy and water

It’s time that energy and water suppliers gave businesses a nudge in the right direction to help them save money by conserving energy and water. How? Through Advizzo’s behavioral science based engagement programs. Using nudge theory based messaging we can help water and energy suppliers notify business owners and managers of consumption increases and promote action to reduce consumption through practical support and advice. 

The nudge behavioral science theory first came to the world’s attention in 2008. Richard Thaler and Cass Sunstein’s book, ‘Nudge’, proposed the theory that people are often unable to make good decisions when they lack experience, context, knowledge, or are overcome with inertia. Over a decade of behavioral economics, research has revealed that ‘nudges’ are effective in influencing consumer behaviors, and as a result, in 2017 Richard Thaler won the Nobel economics prize.

There are 6 key principles to Thaler and Sunstein’s nudge theory. Let’s take a quick look.

1. Defaults: As a direct result of laziness, fear and/or distraction, many people will take the option that requires the least effort. Examples include customers being more likely to stay in a loyalty program if they are automatically included in one. Or, when installing a new app, they’ll adopt the standard settings rather than taking a fully customised approach. According to ‘Nudge’ this behavioral tendency towards doing nothing will be further reinforced if the default option comes with some implicit or explicit suggestion that it represents the normal or even the recommended course of action.For energy and water companies, that means keeping engagement programs simple and easy to understand/adopt – and to demonstrate that the suggested behavior, such as accepting a smart meter, for example, is the ‘norm’.
2. Expect errors: The nudge theory recognizes that humans make mistakes. The principle forms the basis of many useful systems designed to make our life easier. For example, making sure we don’t put diesel in a petrol car by making diesel hose nozzles incompatible with petrol cars – and vice versa. Another example is the way that ATMs spit out our debit card before the cash, so that we don’t leave the card in the machine.When it comes to utilities, many customers could reduce their consumption with an increased awareness of ways to do so, or suggestions on how to reduce leaks.
3. Give feedback: The third principle of the nudge theory is based on the fact that the best way to help humans improve their performance is to provide feedback. Sending utility customers bills that tell them how much energy or water they are using compared to similar businesses, is one such proven technique.Giving customers an opportunity to provide their own feedback through surveys, to ensure their bills, status and consumption data is accurate, is also a proven customer engagement technique.
4. Understand mapping: Humans find some choices are easy to make, whilst others, far more complex. Where decisions need to be made, it’s important to make the information concerning the options available more comprehensive (and relatable) so people can improve their ability to map the consequences and make the right choice.For utility companies that might mean transforming kilowatt-hours used into pounds and pence. For water companies it might involve informing customers on their water consumption in terms of number of showers or baths, as opposed to liters used. It helps customers relate to the consequences of their decisions.
5. Structure complex choices – Social science research reveals that as choices become more numerous, people are more likely to adopt simplifying strategies. This is where a minimum standard is decided and choices that fall outside of that standard are immediately discounted.Therefore, to encourage better consumption behavior, the structure of customer engagement must be consistent and simple. Knowing your consumption for the month is great, but understanding how your consumption has changed over a period of months or years is far more useful and engaging – making it easier for business customers to make better decisions in the long run.
6. Incentives: According to the nudge theory, the person who creates the customer engagement system (the choice architect) must put the right incentives in front of the right people. This should go beyond monetary and material incentives to include other psychological benefits – for example, peace of mind.That’s where using meter data to gain a better understanding of individual customers and subgroups of customers could come in. It can make target marketing of promotions, complementary or additional services far more successful.

How are you helping your business customers to reduce their consumption? Get in touch today to find out more about our nudge based customer engagement campaigns. 

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¹https://www.energymanagermagazine.co.uk/harnessing-behavioural-science-for-energy-efficiency/