Taking Sustainability to the Consumer The CIMCIG Industry Report 2011 Author: Chris Ashworth BSc (Hons) DipM FCIM Chartered Marketer
Introduction
The last CIMCIG report “The Commercial Value of Sustainability” highlighted the opportunities of sustainability for the construction industry. Since then we have seen much progress, most recently with the publishing of the Government’s response to the IGT Low Carbon Construction report and last year’s announcement of the Green Deal. All of which represent opportunities for the construction industry. However CIMCIG remain concerned that the construction industry is not preparing itself to fully exploit this opportunity. We have recently conducted research amongst manufacturers and suppliers of products and systems that can make homes more energy efficient and found that in the short term only 21% of relevant manufacturers see Feed-In Tariffs as a very important opportunity and a tiny 8% of relevant manufacturers see the Green Deal as a very important opportunity. This is in an industry where there is still talk of a double dip recession. This report draws on some excellent work recently published to provide suggestions focused on the opportunities that the Green Deal will provide for companies who wish to develop this market. We hope it will provide inspiration and encouragement to take advantage of what has the potential to be the biggest opportunity for construction this decade.
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Taking Sustainability to the Consumer l The CIMCIG Industry Report 2011
CIMCIG Research Findings CIMCIG commissioned this research to gain a better understanding of how the construction industry was responding to the opportunities to supply sustainable products and services to homeowners. Research was conducted amongst 100 manufacturers and 50 installers identified from the 2011 Ecobuild exhibitors list and from web searches. Interviews were conducted with Marketing or Commercial Managers. A disconnect was noted between the sales and marketing departments of some manufacturers, where Marketing did not seem aware of the initiatives being taken by Sales. Organisations also appear unclear as to what opportunities the Green Deal represents for them and what action they should be taking. Installers’ perceptions of the key benefits of their energy saving services to home owners were principally financially driven; either reducing energy costs (33%) or generating extra income (22%). Similarly, manufacturers saw the principal benefit as reducing energy bills (55%) and home energy generation (45%). Money was ranked as the most important issue to the home owner, followed by reducing climate change and waste. Improved comfort and status with neighbours were considered least important. When describing benefits to home owner other phrases used by installers included; “financial help, trustworthy, after sales service, convenient, advice, efficient, guaranteed, personal service and peace of mind”. In terms of barriers to take-up of the Green Deal, manufacturers identified negative attitudes, resistance to change, inconvenience, mistrust, the long term nature of installations and lack of understanding, awareness and enthusiasm.
The opportunities for manufacturers presented by Feed-In Tariffs are seen as something for the future. While 73% of respondents consider it to be an important opportunity up to October 2012 only 21% see it as very important within that time frame and it is only after 2016 that 62% consider it very important. This, despite 79% of manufacturers currently having products available for Feed-In Tariffs and a further 89% planning to develop products. Similarly, while 35% of manufacturers consider the Green Deal an important opportunity by 2012, only 8% see it as very important and this only rises to 40% after 2016. Although the Green Deal offers a wider product requirement, only 31% of manufacturers said they currently had suitable products available. Of those who do not have products available 69% are planning to develop some. While a similar proportion of installers considering Feed-In Tariffs an important opportunity, recognition of the opportunity presented by The Green Deal at 78% is much higher than for manufacturers. The Renewable Heat Premium is also seen as an important opportunity by 40% of installers. Only one fifth of manufacturers have alliances with installers, or are planning alliances with installers to promote sustainable products. Of those that have had alliances, 79% have found them to be successful. The full research can be downloaded from the CIMCIG website at: http://www.cimcig. org/library.php?id=218
Taking Sustainability to the Consumer l The CIMCIG Industry Report 2011
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The Report
The Market “Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably.” The Chartered Institute of Marketing
Traditionally marketers identify the consumers’ demand, however in the case of sustainability in construction it is the government which is creating the demand using legislation, tax increases and general communication. This is a situation construction marketers should be familiar with as demand for many new products and services in construction are driven by Building Regulations and other legislation. What is new for many of us is the concept of promoting to the consumer. The introduction of Feed-In Tariffs, the Renewable Heat Premium and the Green Deal in combination with ever increasing energy prices and even the possibility of power outages by mid-decade means that a new market is being created amongst home owners for energy efficient products and services. There are various estimates of the value of this, but in excess of 500,000 homes will require upgrading each year, every year, for some time to come. The Federation of Master Builders estimates this to be worth between £3.5 billion and £6.5 billion per year. It is this renovation and improvement market that this report focuses on. While the conditions are being created for a major new construction market, the homeowner has still to become an active consumer. Action needs to be taken to influence the level, timing and composition of demand (extract from Philip Kotler’s definition of marketing). More than half of British consumers tell us that they would be prepared to take action to limit climate change, with three quarters of this group willing to insulate their homes despite some short term disruptionii. What consumers do not perceive is an overall, practical vision either for the UK’s response to climate change or for the housing (new or existing) component within this.
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Taking Sustainability to the Consumer l The CIMCIG Industry Report 2011
For the construction industry to succeed it needs to present these benefits. Others have suggested actions the government should take, this report focuses on the actions individual organisations can take to promote their business into this sector. The Zero Carbon Hub has already suggested that consumers should feel that they are making the right choice for themselves and their family and that their proposed branding a ‘New Way of Living’ (in a home with a lower carbon profile) will actually enhance, as opposed to restrict lifestyle. This re-framing also solves a key problem – and key gap in the current debate – in that it defines the product – namely ‘homes’, something that already exists in the consumer’s mind, as opposed to the abstract concept of zero carbon homes. They have concluded that the task at hand is a fundamental one of market creation. From a consumer perspective, a mainstream market does not yet exist for homes with a lower carbon profileiii. They are encouraging house builders to promote this concept for new homes and it has the potential to become a generic message for both new and upgraded homes.
Creating Awareness The first stage of the buyer decision process, which will lead to the action of making a decision, is that of awareness. Here there is confusion over the various terms. Research has revealed a disconnect between the language of energy efficiency and low-carbon – making the link between individual purchasing decisions and how they impact climate change more tenuous. These findings help explain why the messages to consumers are not getting through. The language of low-carbon is not perceived as relevant to the choices people make in their everyday lives. It is for this reason that the Zero Carbon Hub is recommending the use of the term a ‘New Way of Living’ as they recognise that the zero carbon debate may unintentionally be getting in the way of progressing what could be a motivating opportunity. By re-framing the issue from the negative to the positive, it is possible to change the tenor of the debate.iii It is thus important to use the right language when communicating with home owners (see Communications). Interest Once the consumer is aware of the opportunity, the next step is for there to be interest. A decision to upgrade the home is both expensive and disruptive and will not be taken lightly. Several trigger points have been identifiedii for renovation and improvements: • • • • • • •
Moving house Kitchens and bathrooms changed Heating systems renewed Loft conversions or extensions Having children Children leaving home Retirement
Additional key events for the Green Deal are: • Wider use of Energy Performance Certificates (EPC) • Roll-out of SMART meters and displays • Consumers receiving advice on energy or other household bills Evaluation The process of evaluation will also be influenced by behavioural economics and psychology with three of the drivers being: (i) a tendency to ‘discount the future’ (prefer a smaller reward today over a larger reward in the future) (ii) the power of social norms (people are heavily influenced by what others around them are doing) (iii) the use of defaults (individuals tend to go with the flow of pre-set options, or defaults)viii At present the government’s Behavioural Insights Team is researching how people can be influenced through incentives, neighbourhood joint action, community rewards and behavioural feedback (see Behaviour Change and Energy Use page 21). To allow homeowners to make decisions they need simple, clear and comparable information. The government has started down that route with the introduction of EPCs and SMART meters, which will inform home owners about the energy they use. They will further support it with comparable performance data.
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EPCs were introduced in October 2008, at a time when house sales had plummeted. Consequently they have still only been issued for a relatively low proportion of the housing stock, but research indicates that 18% of people claim EPCs influenced their house-buying decisions.viii Over time, and particularly with the introduction of the Green Deal, EPCs will start to make an impact, increasing consumer awareness and action in the same way that energy certificates on household appliances have been effective because it allows consumers to make comparisons. The CBI found that consumers currently think differently about energy efficiency when making different purchases; while over half take energy efficiency into account in purchasing a fridge, only a quarter considered it in buying a home.iv Research by WRAP in the electrical sector suggests that where two products have broadly the same specification and upfront cost, the energy efficiency factor can tip the balance. This factor may start to apply to the purchase of homes. By 2020 every home is due to be fitted with a SMART meter (Self Monitoring, Analysis & Reporting Technology). Research has highlighted how people are surprised by results from energy monitors and SMART meters because they make visible for the first time the impact on energy consumption of turning on particular products in the home. The Visible Energy Trial of 75 homes in East Anglia found the introduction of energy displays made a significant difference to consumer attitudes. Not only did the displays increase people’s confidence in understanding their own energy use, but 30% reported that their introduction had also encouraged them to buy energy efficient products, with 35% even considering fitting solar panels and 25% insulation as a result.iv
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Taking Sustainability to the Consumer l The CIMCIG Industry Report 2011
But manufacturers and suppliers cannot rely on the government to drive this change. They will need to provide information about how their products perform to allow home owners to make informed decisions. This also raises the issue of trust. In the past decade Greenwash, the practice of making misleading sustainability claims, has become widely used. There are many examples within the construction industry of this as well as in the consumer market in general. As a consequence consumers prefer information that has an independent stamp or third party verification. The consumer group Which? is most trusted to provide reliable energy efficiency and climate change information.iv Combining with the home owner’s general scepticism about green claims is a negative attitude to the construction industry. Research by Consumer Focusii found that consumer confidence in the energy and housing markets and in home maintenance services is lower than other markets. No doubt it is recognition of that fact that has led the government to make accreditation of installers a major plank of its Green Deal strategy. This provides the opportunity to reassure the home owner, not just about Green Deal installations but about all RMI contractors. Companies should support and adopt this fully. Consumer Focusii also found that confidence tends to be lower when: • • •
Calling on a break-down service Where contact is less frequent When issues are complex or customers may have a limited knowledge
Companies providing these services need to be aware of this and work to address concerns and reassure the home owner, recognising their uncertainty and that purchases will be new and one-off.
Functional Benefits
Benefits
• Meets Legislation • Limited disruption • Design advice • Convenient timing • Guarantee • Credit terms • Improved comfort • Increase home’s value
As with any purchase decision the buyer is interested in real benefits. Unlike many purchases there is little ‘pleasure’ to be experienced from the purchase of energy efficiency measures. Suppliers must work to present relevant real benefits and demonstrate value. These include the follows suggestions:
Emotional Benefits • Well known brand • Confidence in quality • Reduce carbon footprint • Create own energy • Reduce waste • Generate renewable energy • Helping the environment • Good for my image • Feel good – part of something Cost Saving Benefits • Reduced energy bills • Produce extra income Benefits providing value Functional Benefits
Emotional Benefits
Meets legislation Limited disruption Design advice Convenient timing Guarantee Credit terms Improved comfort Increase home’s value
Well known brand Confidence in quality Reduce carbon footprint Create own energy Reduce waste Generate renewable energy Helping the environment Good for my image Feel good - part of something
+
=
Value
Cost Reduced energy bills Produce extra income
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Barriers We have seen that lack of knowledge and trust will act as barriers to purchasing energy efficient measures. Cost is another barrier to which the government is proposing a solution in the form of finance from energy savings. Behind these main barriers sit a wide range of additional obstacles dependent on the makeup of the individual household.ii (See case studies pages 15 and 16 for examples of removing barriers.)
However behaviour at home is starting to change. When asked what action they had taken in the past year, that they had not done previously, the most common responses were to: • Use low energy light bulbs (44%) • Switch off appliances (39%) • Turn down heating (38%) • Recycle (34%) • Insulate the home (12%)ii
The Value Action Gap has been identified as one barrier to home owner purchase. A gap between people’s level of concern about the environment and their actions. Research findings show that there is widespread awareness of environmental problems and that the majority of people recognise that their everyday behaviours contribute to these. This could be partly driven by a belief that taking on new behaviours will have a negative impact on current lifestyle.
Lack enthusiasm
Chart: Manufacturers’ view of principal barriers
4%
Not enough payback
8%
Mistrust
8%
Too long term
8%
Inconvenience
12%
Resist change
12%
Lack awareness
12%
Attitudes
20%
Lack understanding
Base: 25
7
28% 0%
Taking Sustainability to the Consumer l The CIMCIG Industry Report 2011
10%
20%
30%
Influencers The classic marketing Decision Making Unit comprises Influencer, Initiator, Decider, Buyer and User. In the case of the home these roles will be distributed among the members of the household, with the exception of the Influencer. Here there is a wide range of influences which will drive the decision. But people have lost trust in traditional opinion leaders. They use the media to find out more information on environmental and social issues. Films or TV documentaries and friends or families have most influence.ii They need to see real examples of energy efficiency measures, not special one-off projects. For this reason it is expected that adoption will be by referral, with people deciding to implement measures because they have seen their neighbour or the house down the road doing something. Suppliers need to promote and encourage this, providing plenty of ‘real life’ examples of projects. Projects also need to be described in general language and not the technical language of energy efficiency or construction (see Communications). Segmentation To get maximum value from the market it is necessary to define the market segments and identify those which offer the best opportunity. By defining segment personalities it is also possible to tailor communication to have maximum appeal to each segment. In its report ‘A framework for pro-environmental behaviours’ published in January 2008 Defra identifies 7 segments which can be modified to provide a convenient means of categorising the residential market for sustainable products. Of these segments 1, 3 and 4 represent the best opportunity for promotion of sustainable technology.
Segment 1: Positive greens 18% of the population (7.6 million) “I think we need to do some things differently to tackle climate change. I do what I can and I feel bad about the rest.” • Assess themselves as acting in more environmentally friendly ways than other segments. • Most likely to want to live a more environmentally friendly life. • Hold the most positive pro-environmental attitudes and beliefs. • Likely to be doing most to reduce their impact on the environment including saving energy and water, they are the heaviest recyclers. • Most likely to buy ethical and local products including local food and fair trade. • The least motivated by saving money and the most willing to pay more for environmentally friendly products. • Least likely to cite generic barriers to being more environmentally friendly. • Have the highest levels of knowledge about environmental terms, although still around a half know little or nothing about carbon footprints. • Most likely to want more information on what they can do. • Most likely to seek to influence friends, family and the workplace to be more environmentally friendly. • Most likely to be involved in environmental and community organisations, although still at low levels. • Most likely by far to be in AB socio economic groups and have a degree, with household incomes of £40k and over per annum. • They are the most likely to read The Guardian, Independent or Times. • Their profile is biased towards middle age (41-64), and owner-occupancy.
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Segment 2: Waste watchers 12% of the population (5.1 million) “’Waste not, want not’ that’s important, you should live life thinking about what you’re doing and using.” • Doing more than any group other than Segment 1 to help the environment. • Behaviour is driven by an urge to avoid waste rather than seeking to reduce environmental impact. • Likely to rate their behaviour as environmentally friendly. • Nearly three quarters are content with what they are currently doing to help the environment. • View tends to be slightly more pro-environmental than the average, but they are also more likely to be sceptical about environmental problems. • Very concerned about changes to the UK countryside and loss of biodiversity. • Say the environment is a high priority for them, but are the second least likely group (after Segment 7) to feel guilty about their environmental impacts. • Current focus on the home including saving energy and water, using a more fuel efficient car and purchasing ethical and local/national products. • Very committed recyclers, indeed they are most likely to volunteer that they cannot recycle any more as they already recycle as much as they can. • Have a middle age and older age bias. One third aged 65 and over. One third are retired, and many are on low incomes (two fifths on £20k per annum or less). • Over half own their homes outright • Are the most likely to read the Daily Mail or Telegraph.
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Taking Sustainability to the Consumer l The CIMCIG Industry Report 2011
Segment 3: Concerned consumers 14% of the population (5.7 million) “I think I do more than a lot of people. Still, going away is important, I’d find that hard to give up well I wouldn’t, so carbon offsetting would make me feel better.” • Hold broadly pro-environmental beliefs, with less conviction than Segments 1 and 2. • Particularly sympathetic to the concept of ‘climate change’, acknowledge their personal impact and see taking action as important. • Show the strongest rejection of any group to the idea that we are reaching our limits to growth and they also doubt that an ecological crisis is imminent. • Rate themselves as environmentally friendly, two thirds claim they would like to do more. • Focus on environmental behaviours in the home including saving energy and water (similar to Segment 5) and some purchasing behaviours. • They are less likely than average to cite general barriers to pro-environmental behaviour, such as money-saving and inconvenience. • They like to think that they are doing more for the environment than they are. • One third are aged 30-40, with the lowest levels aged 65 and over. • Slight bias towards ABC1. They are the second most likely to have a degree. • One third have household incomes of £40k per annum and above, this includes the highest level of all groups with household incomes of £60k and above (nearly one fifth of the group). • They are the most likely to be owner occupiers with a mortgage, and the most likely to have dependent children (along with Segment 5).
Segment 4: Sideline supporters 14% of the population (5.6 million) “I think climate change is a big problem for us. I suppose I don’t think much about how much water or electricity I use, and I forget to turn things off. I’d like to do a bit more.” • Has a generally pro-environmental view, although beliefs are held relatively weakly. • Second only to Segment 1 in anticipating an imminent crisis; however likely to think that humans (possibly other people) will find the solution. • Green beliefs have not translated to behaviours. • More likely than the first three segments to say they have not thought about changing behaviours. • Two thirds say they know nothing about carbon footprints. • Current behaviours are less ‘green’ than all except Segments 6 and 7. • Most say they are doing one or two things to help the environment and would like to do more. • Acknowledge a range of barriers more readily than Segment 3, such as the need to fit with their current lifestyle and the difficulty in changing habits. • More likely to feel guilty about harming the environment (with Segment 5). • Recognise the environmental issues, are willing to learn and do more. • Appear receptive, are unlikely to be proactive in acquiring information or adapting their behaviours. • Span all ages, under 30s are over- represented. • Have average levels of household income, but with a bias towards C2DE. • More likely than average to read the Daily Mail or the Sun. • Fewer than average are educated to degree level.
Segment 5: Cautious participants 14% of the population (5.6 million) “I do a couple of things to help the environment. I’d really like to do more... ...well as long as I saw others were.” • Environmental view close to the population average. • Tend to agree there is a pressing crisis and that there are limits to growth. • Pessimistic about our ability to tackle climate change, but recognise their impacts. • Current behaviours focus on the home, including saving energy and water. • A sense of popular momentum may be required for this segment to act. • Report more barriers to pro-environmental behaviour than Segments 1 and 3, including the need to fit with current lifestyle and difficulty in changing their habits. • More likely to feel guilty about harming the environment (with Segment 4). • Environmentally friendly behaviours not a natural fit with their self-identity. • Half report doing only a few things or nothing pro-environmental, but three quarters say they would like to do more. • Has a younger than average age profile, with one quarter 30 and under and nearly as few aged 65 and over as Segment 3. • Most likely to have dependent children. • Slightly more likely to be renting than Segment 3.
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Segment 6: Stalled starters 10% of the population (4.1 million) “I don’t know much about climate change. I can’t afford a car so I use public transport. I’d like a car though.” • Present somewhat confused environmental views, mostly strongly negative. • Have the highest level saying climate change is too far in the future to worry about and, with Segment 7, the highest levels believing that the environmental crisis has been exaggerated. • Have the lowest levels of knowledge about environmental terms: only just over a third know more than a little about climate change, and nearly three quarters know nothing about carbon footprints. • Most likely to say that their behaviour does not contribute to climate change, and that the environment is a low priority for them personally. • Less likely to focus on thinking about the levels of energy and water they use in the home or generally undertake the smaller behaviour changes. • Have a lot of serious life priorities to address before they consider the environment. • The most likely to cite barriers to change of convenience, difficulty, cost issues, others’ level of action, and the need for behaviours to fit with their lifestyle. • The most likely to see being green as embarrassing. • One sixth of this segment (the highest of any) say they are doing nothing to help the environment. • Two thirds say they are happy with what they are doing and they do not want to do more. • Have the lowest social profile of any group, nearly half are DE and the lowest levels of income (nearly half are on less than £20k).
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Taking Sustainability to the Consumer l The CIMCIG Industry Report 2011
• Tend to be younger or older, with middle aged people under-represented. The group includes more black and minority ethnic than average. • Have the lowest levels of qualifications of any group (half have none), and are the most likely not to be working. • The most likely group to read the Sun and Mirror.
Segment 7: Honestly disengaged 18% of the population (7.4 million) “Maybe there’ll be an environmental disaster, maybe not. Makes no difference to me, I’m just living my life the way I want to.” • Ecological view is predominantly shaped by a lack of interest and concern. • Sceptical about the current environmental threat (half think it has been exaggerated). • More likely than most to think the problem will be solved without people needing to make changes to their lifestyles. • Do not see themselves as ‘green’ in any way. • On each of the main environmental issues, roughly a third of this group (far more than any other) does not express an opinion. • Rate themselves as having the lowest levels of pro-environmental activity: more than half do little or nothing. • Have the highest level saying they are happy with what they are doing, and they do not want to do more to help the environment.
• The least likely segment to want more information about what they could do to help the environment. • Likely to say that they find it difficult to change their habits or that it needs to fit with their lifestyle. • The least likely to feel guilty about harming the environment. • The group spans all ages, under 30s are over-represented (comprising more than a quarter). • Slightly more C12DE with ABs underrepresented; income levels are also slightly below average. Slightly fewer than average have degrees. • More likely than average to be working full-time and to be renting. • Read the Sun and The Star.
Consumer sustainability segmentation identified by defra Potential to do more, and how
Potential to do more
High potential and willing
High
Encourage Exemplify
Enable
1: Positive greens
Engage 3: Concerned consumers
Enable
2: Waste watchers
5: Cautious participants
4: Sideline supporters
Low
Willing to act High
6: Stalled starters 7: Honestly disengaged
Encourage Enable
Low
Low potential and unwilling Taking Sustainability to the Consumer l The CIMCIG Industry Report 2011
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Communication Communication has an important role to play, initially creating awareness, then informing the home owner. To be effective the right language will have to be used. An individual organisation promoting products or services will need to present clear, credible and comparable communications which are strong and compelling against the background of messages delivered by government and the industry generally. Consumer Focusii make the following recommendations: Clarity – Claims that are easy to understand; Succinct, simple, to the point without confusing imagery. Credibility – Realistic, accessible and verifiable claims; Avoid small text, asterisks and foot notes. Include third-party endorsements from well known and respected organisations. Where possible align products with existing products and services. Comparability – Provide simple, meaningful and like-for-like comparisons. It is also important to follow Defra’s Green Claims Guidance (http://www.defra.gov. uk/publications/files/pb13453-greenclaims-guidance.pdf). The language used is also important. As already stated there is a disconnect between the language of energy efficiency and low-carbon. There is a perception that green/eco/sustainable is for environmentalists. As one resident said during research into his sustainable home “no – it’s not an eco house – that’s for those people who build it all themselves – this is just a normal house”.iii
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Even energy efficiency is a complex term. Benefits need to be presented in a form that is relevant to the audience. Increased levels of loft, floor and wall insulation, reduced thermal bridging, triple glazing and improved air tightness, when translated into liveability benefits such as lower energy bills or fewer draughts are genuinely motivating factors to prospective purchasers.iii It is also important to deliver messages with the target segments and age of the homeowner in mind. Differences in energy literacy appear to relate to age more than educational attainment, with consumers aged between 55 and 64 most knowledgeable.ii Communication messages should be designed on the basis that different groups of consumers respond to different drivers. In their research the CBIiv found that only 15% of total participants claimed that clear evidence of a product’s reduced environmental impact would be the most important driver – yet this figure jumps to a quarter (24%) for broadsheet readers alone. Use the segment profiles to frame messages. (See case studies pages 15 and 16 for examples of communication.)
Conclusions The government is committed to the Green Deal, but to achieve take-up a marketing approach is needed to inform and motivate the home owner. This needs to focus on real benefits and avoid the jargon sometimes associated with sustainability. Many companies in the construction sector are still not preparing for this. But products and systems will need to be approved and in the market in just over a year. New systems that are introduced must not disappoint the home owner once installed. They need to be designed to work effectively in their primary function and as a sustainable product. Installers must be fully trained and home owners must know how to use them effectively. No single section of the construction industry can work in isolation, trade associations, manufacturers, contractors and wholesalers must work together to create an effective supply chain. While the construction sector remains sceptical about the Green Deal and its success, organisations from outside the sector like the energy companies and major retailers have recognised the opportunity and are starting to act. Construction runs the risk of becoming a second tier supplier to these organisations. Once we let new entrants into the market they will not be satisfied with just the Green Deal, they will expand into general refurbishment and then new build. In so doing they will marginalise the traditional players in the market. The Green Deal is a tremendous opportunity for the construction industry, companies must act now and make sure they deliver an effective and attractive solution.
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Case Studies
Creating the business opportunity
Making it Easy to Buy
One of the UK’s fastest growing providers of renewable energy systems, The Green Home Company, has created its own business opportunity by securing private finance to allow them to install free solar PV systems. Most recently they have secured £15 million of finance from groups who specialise in backing clean technology companies. This will enable the Kent-based company to install solar PV systems, worth up to £15,000 each, to around 1400 qualifying homeowners in the period up to March 2012.
To encourage home owners to buy insulation, energy companies have been partnering with merchants to make it easier to buy insulation at subsidised prices. Firstly this requires an easy to understand price model quoting a price per roll. To support this online calculators are available so that a home owner can easily work out how many rolls of insulation to buy.
Offering a guaranteed income for 25 years, Feed-in Tariffs have enabled The Green Home Company to create their own market by offering homeowners totally free solar electricity. This is made possible by the company keeping the FITs payments, rather than the homeowner. In exchange for allowing panels to be fitted to their roof the homeowner will benefit from free electricity generated by the solar panels. Following a roof suitability application process, any qualifying home could start saving hundreds of pounds a year in energy bills. Suitability will depend upon criteria including size of roof and its direction – ideally south-facing pitched roof with minimal shading so as to achieve maximum output. “We are delighted to have secured this funding,” commented Alan Proto, MD of The Green Home Company. “We anticipate the growth of solar energy to be massive over the coming months and years and thanks to the funding and the Government’s Feed-In Tariffs, we are in the enviable position of being able to offer homeowners free installation. We naturally expect demand to be extremely high as this offers homeowners a zero cost method of reducing their energy bills – something that is very welcome, especially following recent price increases introduced by the leading energy companies.”
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Free Delivery was a major factor in securing participation, removing the problem of getting a bulky item home from the merchant or DIY store. Communicating with the Consumer Michael Longhawn, 60, from Gildersome, Yorkshire applied for a Government grant for insulation after reading an article in his local paper about the energy saving benefits of insulating his property. Michael had cavity wall insulation installed in his 1950’s three bed semi and soon noticed a difference in his energy bills. Michael knew from DIY programmes on TV about both the energy and money saving benefits of insulating his loft. He wanted a fuss-free solution so opted for Space Loft Roll, Space Insulations glass mineral wool product made with ECOSE Technology, a unique and environmentally sustainable binder. Michael was delighted with the results; “Space Loft Roll was soft to handle, odourless and easy to work with. We no longer need the heating to be turned up high for us to be comfortable in our home.”
British Gas launches Home Energy Plan
Thinkinsulation.com
British Gas launched the Home Energy Plan, a forerunner to the government’s Green Deal programme. It enables British Gas energy customers who own their own home and pay by direct debit to install measures such as a new efficient boiler, insulation and renewable technologies at no upfront cost or with a small deposit. Alternatively, customers can choose a finance plan where monthly repayments are covered by the savings made from being more energy efficient.
In October 2004 leading insulation manufacturer, Knauf Insulation, partnered with the Energy Saving Trust to launch energy saving advice website, thinkinsulation.com. The online resource is a one-stop-shop for consumers, offering useful information and tips about how to improve their home’s energy consumption, help reduce emissions of harmful greenhouse gases and save money. The website, which received over 67,000 unique visitors in 2010, is rich with interactive content including diagrams and videos which help to explain how insulation works as well as advice about why it’s the most cost-effective and sustainable energy saving product on the market. In addition to explaining the various ways to upgrade a home’s energy rating, the website also offers consumers the chance to request a no obligation survey and quote.
Eligible measures include: • Efficient heating products: A-rated boilers, ground source heat pumps, air source heat pumps, solar thermal, pipe wrap, water tank jacket, thermostatic radiator valves, programmable thermostats • Insulation: Cavity wall insulation, loft insulation, solid wall insulation • Saving electricity: Voltage optimisation, eco-kettles, efficient lighting, electricity monitors, standby savers • Generating electricity: Solar PV, Baxi Ecogen Boiler (stirling engine). All customers signing up to the plan will receive a free, no-obligation survey of their home by a British Gas energy expert. The expert will take the customer through the home, recommending bespoke measures and outlining the estimated annual savings that could be achieved.
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Appendix 1
The Green Deal The Green Deal, which is part of the Energy Bill placed before Parliament in December 2010, started as a concept of the previous Labour government (Warmer Homes, Greener Homes) and will be launched in Autumn 2012. It is intended to make existing homes and small businesses more energy efficient by giving incentives which will be paid for through savings on energy bills. This is probably the most important driver for construction in the next 10 years. The government predict that this initiative will create a workforce to fit energy efficiency measures of 100,000 people by 2017. Products Eligible for The Green Deal As yet a list of approved products has not been finalised, but the government has identified the following products as offering the best potential savings. These are listed in order of benefit: Reducing Demand • Smart Meters • Cavity Wall Insulation • Loft Insulation • Solid Wall Insulation Renewables • Ground Source Heat Pumps • Air Source Heat Pumps • Biomass Boilers • Solar Thermal and Solar PV The Green Deal Process To reassure and inform homeowners there will be a network of Green Deal advisors who will evaluate a property and present the choices. As part of this each home will need to meet the ‘Golden Rule’ that the costs of repayment will not exceed the energy savings achieved over a repayment period. The Golden Rule is still under development and now looks likely to allow a combination of Green Deal funding and private funding to allow for developments,
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such as a house extension, where some of the work will involve upgrading efficiency in combination with general improvements. Once the specification for upgrading is determined there will be a network of accredited installers from whom the homeowner can select a company to undertake the work. These companies will be responsible for all aspects including the financing. Since the introduction of the Green Deal the scope has been broadened from just the upgrading of existing homes to include all types of building upgrades and most recently the cost of introducing low carbon measures to new homes. We are still awaiting further details on these additions. The United Kingdom Accreditation Service has been appointed as the accrediting body for Green Deal assessors and is developing a robust standard to ensure the quality and impartiality of the assessment. All assessors will need to comply with the Code of Practice being set up under secondary legislation, in order to carry out assessments under the Green Deal. The British Standards Institute is developing a Publicly Available Specification (PAS 2030) for the installation of energy efficiency measures in domestic and non-domestic buildings. This will provide a consistent method of assessing Green Deal installers across the range of measures that qualify under the Green Deal. UKAS will accredit certification bodies to this standard. Members of these bodies will then be entitled to operate under the Green Deal. It is hoped that this will drive standards within the sector and encourage investment in training.
Financing the Green Deal
Green Deal Implementation
Initial view on financing was that there would be a single finance provider, with the energy companies responsible for collecting repayments. The Department of Energy and Climate Change have now indicated that they are considering the option of allowing large providers to arrange their own finance and also considering allowing different finance providers to work with the smaller providers. This will change the dynamic of the whole concept and may disadvantage the smaller players. When recently announcing the Green Investment Bank (GIB) the government indicated that Green Deal schemes would be considered for GIB funding.
Target for implementation is Autumn 2012. At present the government is still in the process of consultation with officials from DECC developing the technical details for secondary legislation. As part of this process four Green Deal stakeholder advisory forums have been established:
DECC is now carrying out an evaluation of CERT, CESP and Warm Front as they design the Energy Company Obligation, or ECO, which will take over from these schemes in 2013. It is intended that ECO will build on the strengths of the existing schemes and is intended to integrate fully and seamlessly into the Green Deal market, supporting the Green Deal in ensuring all households can take advantage of energy efficiency improvements to their homes. The ECO will set concrete targets for domestic energy efficiency improvements which energy suppliers are required to meet. It will be focused on the needs of lower income and the most vulnerable households and properties which are harder or more expensive to improve and for which Green Deal finance is less likely to fully support the cost of improvements.
Installer Accreditation & Qualification Forum: To advise the Government on the creation of an ‘accreditation and qualification framework’ for installing energy efficiency products under the Green Deal. Green Deal Advice Qualification & Accreditation Forum: To advise Government on the development of the advice framework for the domestic and non-domestic Green Deal. Capacity & Innovation Forum: To advise Government on the supply chain evolution required to meet 2020 Green Deal related climate change targets. Maximising Energy Efficiency in Buildings: To suggest ways of increasing the uptake of the Green Deal across a range of property tenures, types and geographic locations. This includes involvement of energy companies and Local Authorities.
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Appendix 2
Green Deal Implementation Government Response to the Low Carbon Construction Innovation and Growth Team, HM Government, June 2011. Royal Institution of Chartered Surveyors
Provide advice and support to Government in relation to Green Deal including: - the regulation of assessors - share existing information, advice and guidance on retrofitting of homes - highlight the independent professional advice on energy efficiency provided by members - consider producing guides to retrofitting homes and business premises.
Ongoing
National Specialist Contractors Council
Contribute to the development of standard solutions for typical properties for the conditions required for the measures to be installed, in collaboration with trade associations.
Ongoing
Energy Efficiency Partnership for Homes
Build on the EEPH structures for achieving consensus on projects as part of the development of the Green Deal.
Ongoing to March 2012
DECC
Develop policies to enable application of Green Deal to the commercial sector, alongside household offer.
Ongoing
DECC
Announcement of the intention to establish an Office of National Energy Efficiency within DECC to provide a wider energy efficiency strategy, strong programme management, and a cohesive view of DECC’s customer facing policies. Official start date to be confirmed.
May 2011
DECC
Work with potential Green Deal providers to facilitate early precursor offers to the Green Deal.
June 2011 onwards
Royal Institution of Chartered Surveyors
Share findings of the Doing Well by Doing Good research into the impact of energy performance ratings on the value of commercial property in the USA with Government and replicate in the UK subject to data and information availability.
July 2011
United Kingdom Accreditation Service
Open call for Green Deal accreditation of certification bodies. First accredited bodies expected April 2012.
July 2011
DECC
Consult on secondary legislation to enable the Green Deal, including the new obligation on energy companies.
Autumn 2011
Industry
Respond to consultation on secondary legislation to enable the Green Deal, including the new obligation on energy companies.
Autumn 2011
DECC
Review of existing product certification bodies, including warranty and guarantee schemes. Consult on process for verifying product performance.
Autumn 2011
Industry
Respond to consultation on process for verifying product performance.
Autumn 2011
DECC/ Energy Efficiency Partnership for Homes
Assessment of supply chain capacity to deliver Green Deal retrofit programme by Green Deal Capacity and Innovation Forum convened by EEPH for DECC.
Autumn 2011
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National Specialist Contractors Council
Provide Government with additional market sector intelligence to deliver the installation of Green Deal Measures.
Autumn 2011
Defra
As part of broader sustainability information available under the Green Deal, develop advice on water efficiency.
January 2012
DECC / British Standards Institution
Publication of final Publicly Available Specification (PAS 2030) for the installation of energy efficiency measures into existing domestic and non-domestic buildings.
January 2012
DECC
Lay secondary legislation to enable the Green Deal.
Early 2012
DECC / DCLG
Examine the operation of the energy performance of buildings regime to ensure it is capable of supporting Green Deal delivery.
April 2012
DECC
Develop accreditation process to ensure public confidence in Green Deal measures. Consultation Autumn 2011.
May 2012
DECC
Green Deal Code of Practice established for products, installers and suppliers under secondary legislation of the Energy Act. Consultation Autumn 2011.
May 2012
National Specialist Contractors Council
Work with its member organisations to ensure they understand the requirements and if appropriate are able to implement a means of accrediting their members.
May 2012 onwards
DECC / Energy Companies
Launch of new Energy Company Obligation to provide energy efficiency improvements for “hard to treat” properties and vulnerable households.
Autumn 2012
DECC
Launch of Green Deal.
October 2012
DECC
Develop options for generating additional demand for energy efficiency measures alongside the Green Deal finance offer.
October 2012
DECC
Monitor roll-out of Green Deal.
October 2012 onwards
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Appendix 3
Behaviour Change and Energy Use A new report has just been published by the government’s Behavioural Insights Team which sets out research into how people can be encourage to green their homes and be more energy efficient. These pilots are based around behavioural economics and psychology with three of the most significant insights relating to: (iv) our tendency to ‘discount the future’ (prefer a smaller reward today over a larger reward in the future) (v) the power of social norms (people are heavily influenced by what others around them are doing) (vi) the use of defaults (individuals tend to go with the flow of pre-set options, or defaults They are conducting a number of research projects, including four large-scale field trials, in time for the launch of the Green Deal. 1. Effectiveness of offering upfront incentives to encourage the uptake of energy efficiency products including a month’s holiday from council tax payments and the offer of a voucher for goods and services. Commercial partners: Homebase supported by Carillion. 2. Two trials will be run. To evaluate the impact of offering energy efficiency products and services at varying levels of discount depending on how many people opt in to the offer to encourage neighbours to act together. Secondly, as a major practical and psychological barrier to loft insulation is the requirement to clear out a cluttered loft, a subsidised loft-clearing service will be offered. Commercial partner: B&Q.
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3. A trial to test the impact of offering community rewards for the take-up of the Green Deal. Depending on results from initial focus groups, rewards could range from microgeneration technology for community buildings, to training for community volunteers and additional support for vulnerable groups.Commercial partner: E.ON. 4. A trial of how behavioural feedback, including comparative consumption information showing how individual energy use compares with similar neighbours to help consumers with smart meters to save energy. Commercial partners: First Utility and Opower. In addition British Gas and AlertMe will investigate the effectiveness of different channels in providing personalised information to smart meter consumers about their energy use as well as personalised hints and tips on how to save energy. Other initiatives include redesigning Energy Performance Certificates to include a clearer signpost to the Green Deal and precipitate greater action towards making energy efficiency improvements. This follows research which indicates that 18% of people claim that EPCs influence their house-buying decisions.
Acknowledgements
This report draws heavily on four documents which have provided useful ideas and concepts. They are recommended as further reading to anyone who intends to promote sustainability to the consumer:
References i
Building a Greener Britain Federation of Master Builders, July 2008.
ii
Green deal or no deal Building customer confidence in energy efficiency services. Liz Lainé Consumer Focus, March 2011.
iii
Marketing Tomorrow’s New Homes Raising Consumer Demand For Low & Zero Carbon Living The Zero Carbon Hub, February 2010.
iv
Buying into it. Making the consumer case for low-carbon. CBI, March 2011.
v
Consumer attitudes to sustainable electrical products. WRAP, March 2010.
vi
Construction Industry Engagement with the Consumer. CIMCIG, June 2011.
vii
A framework for pro-environmental behaviours. Defra, January 2008.
viii
Behaviour Change and Energy Use. Cabinet Office Behavioural Insights Team, July 2011.
Buying into it Making the consumer case for low-carbon CBI, March 2011 http://climatechange.cbi.org.uk/reports/buyinginto-it-making-the-consumer-case-for-low-carbon
Green deal or no deal Building customer confidence in energy efficiency services Liz Lainé Consumer Focus, March 2011 http://www.consumerfocus.org.uk/publications/ green-deal-or-no-deal
Marketing Tomorrow’s New Homes Raising Consumer Demand For Low & Zero Carbon Living – The Zero Carbon Hub February 2010 http://www.zerocarbonhub.org/resourcefiles/ ZCH_Marketing_Tomorrows_New_Homes_ Report_Final.pdf
A framework for pro-environmental behaviours Defra, January 2008 http://archive.defra.gov.uk/evidence/social/ behaviour/documents/behaviours-jan08-report.pdf
The author thanks two recent speakers at a CIMCIG seminar for providing the inspiration and direction to write this report: Liz Male, Liz Male Consulting Paul White, The Social Marketing Practice
Pictures provided courtesy of: www.greatbritishrefurb.co.uk: Cover Knauf Insulation: Pages 8, 13, 15, 20 & 22 Sto: Pages 3 & 4 Redland: Pages 5/6, 9/10, 11/12 & 21 Dimplex Renewables: Page 7 Baxi: Page 16 The Green Homes Company: Page 17/18 Pilkington: Page 19
Taking Sustainability to the Consumer l The CIMCIG Industry Report 2011
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About the Author Chris Ashworth is a Fellow of The Chartered Institute of Marketing and a Chartered Marketer. He founded Competitive Advantage Consultancy Limited in 1999 and works as a marketing and sales consultant. Prior to that he worked for building product manufacturers and has over thirty years sales and marketing experience in the construction industry. Chris runs a series of training programmes in collaboration with The Building Centre on marketing and sales issues, has been an Associate Lecturer in Marketing at Oxford Brookes University and is a member of the organising committee for The Chartered Institute of Marketing Construction Industry Group (CIMCIG). He is also a regular contributor to a number of industry publications. www.cadvantage.co.uk
About CIMCIG CIMCIG is The Chartered Institute of Marketing’s Construction Industry Group. Construction is an industry with an annual turnover of £102 billion, about 7% of the UK’s GDP, and which employs over 2 million people throughout the UK. CIMCIG works on behalf of its members to raise the status of the marketing profession in the construction industry. It is the forum for marketers in the sector to share knowledge, skills, information and best practice. CIMCIG provides a mix of events, seminars, conferences and white papers that are genuinely useful to marketers in construction. Whether they work for contractors, manufacturers, professional practices, materials suppliers, information providers or specialist marketing consultants, we advance the careers of our members by demonstrating that companies which employ professionally qualified marketers outperform those that do not. Membership of CIMCIG is over 1,000 and growing. www.cimcig.org