The business case for kindness in the utilities sector

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In many countries around the world, COVID-19-related lockdowns are being eased. We are slowly starting to take steps away from isolation into what many are calling a "new normal." But few are talking about getting "back to normal." There is a general sense that the future may look very different, particularly in economic terms.

Lockdowns have made a huge economic impact. Large sectors of the economy have been closed down for several months. And other sectors may not fully open for some time yet. Economists talk about bouncing back, but with tempered enthusiasm. The overall impact on GDP is expected to be around 5%, and higher in some parts of the world. PwC estimates that COVID-19 will have a 40% impact on consumer confidence, with a similar impact on productivity. The overall financial impact is estimated at a huge 71%, including the effect on liquidity and capital.

Hidden Insights: The business case for kindness in the utilities sector

The business case for kindness in the utilities sector

And these disruptions exist on top of already-difficult market conditions. New entrants are challenging incumbents with new business models while digital transformation is putting huge pressure on firms. Many who are already struggling to survive find it even harder due to COVID-19.

Changing the future

Businesses must likely operate differently in the future. Many boards are already grappling with these issues, considering both short- and long-term prospects. There must be a balance between short-term profits and long-term sustainability. Decisions about technology investments must provide further value.

But in the short term, there may also be some hard decisions about how to treat customers. Utility companies will see more customers unable to pay their bills due to the economic consequences of COVID-19. Both individuals and corporate customers may struggle with cash flow and financing. How should utilities handle this?

I think there is a strong argument for using kindness as the guiding principle. Kindness is traditionally a virtue in many societies. Aristotle defined it as “helpfulness towards someone in need, not in return for anything, nor for the advantage of the helper himself, but for that of the person helped.” In other words, do something simply because it will help another. In business, showing kindness may lead to economic rewards.

Brand impact of behaviour

Utility companies (and many other businesses) have a choice when it comes to debt collection. They can practice aggressive debt collection, forgive the debt or offer a "holiday" that delays repayment. On the face of it, this looks like a very easy choice. Because businesses have to survive, they should collect debts.

However, governments around the world are offering support packages that help businesses cope with the impact of COVID-19. There are tax deferral schemes in many sectors and countries. In Austria, utility companies do not have to pay taxes and network charges until they receive payments from customers or have payment plans in place. In Spain and Italy, they may arrange to defer part of the payment until the customer has paid. In the Netherlands, energy suppliers may postpone their energy tax payments.

With these arrangements in place, aggressive debt collection is likely to be counterproductive. Therefore, such tactics are not an essential part of doing business. The damage to the brand is likely to be significantly greater than the benefits of collecting the debt. This is particularly true if utilities need to raise extra funds because brand strength contributes to market value, which determines interest rates on borrowed money.

Analysing and understanding

Instead, utilities may better serve their interests by pre-empting customer needs. Customers are (and should be) far more than simply a credit score to any business. Seeing them as individuals matters even more in hard times. Savvy utility firms are using analytics to get a grip on their data so they can better understand and segment customers. Having a consistent and reliable view of customers goes a long way toward enabling appropriate marketing activity for both existing customers and prospects. As we move into the "new normal" such a view of customers will matter even more.

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About Author

Carlos Carvalheira

I am a professional to create strategies and plans that define how information technology should be utilized to support and leverage organizations' business goals to create competitive advantage. As an influencer I am proposing innovative solutions supported by insights and best practices, partnering internally and externally with my ecosystem to make bold decisions to provide value to my clients. Eager to identify projects with high impact in the bottom line, tactical and strategic growth opportunities, innovative projects, develop effective business unit strategies in alignment with the corporate strategy and portfolio management to business needs.

1 Comment

  1. Carlos,
    In North Carolina, utilities are forbidden from collecting past-due debts from consumers during the lockdown by dictate from the Governor. The dominant utility in NC has the financial resources to survive the resulting revenue loss, but smaller regional utilities in NC are on the verge of bankruptcy if this continues. What advice would you give those smaller utilities?

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