And, in fact, the activists’ tactic worked: TXU built fewer coal-fired power plants, increased its investments in energy efficiency, and doubled its wind energy market.
While energy companies like TXU may see activists and environmental NGOs as a thorn in the side, Kellogg professor of management and organizations Brayden King argues that activists play a key role in driving innovation and growth in green energy.
In research conducted with Ion Bogdan Vasi of the University of Iowa, King found that embattled energy companies and the activists who target them can create unlikely partnerships that are key to growing the market for green energy technologies.
Energy companies that activists labeled as the dirtiest polluters were the most likely to respond to that stigma by adopting green energy technologies, the researchers found. The companies then received the benefit of free promotion of their green programs by local environmental NGOs.
“We knew that activists targeted companies as bad actors, and now we know that energy companies are more likely to adopt sustainable products if they’ve been branded as bad actors,” says King. “This shows that environmental activists, in particular, are essential to the development of sustainable markets.”
Growing the market for green energy technologies could pave the way for both higher yields and a cleaner, greener Earth.
“I’ve spent my career studying activists and how they influence companies, and I know that energy markets are where we can make a big difference in reducing carbon emissions,” King says.
Addressing stigma — the right way
Vasi and King’s research explores technology stigma—the idea that certain technologies are more likely to be labeled dirty or dangerous—and the strategies companies use to reduce that stigma.
The technological stigma appears in all industries: think of pesticides in agriculture or the removal of mountains for mining. After the 1979 Three Mile Island accident, in which a nuclear reactor in Pennsylvania released radioactive gases into the environment, nuclear technology was discredited by some as more dangerous than useful.
Coal-fired power plants have faced stigma for decades. After all, they broadcast the most air pollutants and greenhouse gases of all fossil fuels. “Public opinion about coal started to change in the early 2000s, and activists promoted that stigma,” says King. “It was the easiest power generation to target if you were an activist and wanted to pressure companies to change.”
Companies, in turn, use various strategies to reduce stigma. They may diversify into the food industry, as did some tobacco companiesor engage in reputation management.
In the case of companies using coal-fired power plants, adding greener alternatives to their portfolio could bring them good publicity and help counter society’s negative perception of them. While there are high costs to making these changes, there can also be financial benefits.
“The idea of windmills creating energy based on the Earth’s natural forces makes customers feel good,” says King. “They may be willing pay a premium for energy, knowing it comes from a good energy source.”
This is exactly the kind of information that environmental NGOs are more than happy to promote.
In the late 1990s, for example, Xcel Energy formed partnerships with a number of environmental organizations that helped promote Xcel’s Windsource renewable energy program. This meant that although Xcel spent less money than other utilities on marketing, Windsource’s program was number one total customers for green energy programs in the country for several years.
Measuring dirty power plants and NGOs
King and Vasi decided to systematically examine these kinds of partnerships to try to understand them better.
King knew from previous research that environmental activism can challenge the status quo and shape the way businesses perceive and respond to environmental risk. He therefore wondered whether energy companies labeled as bad actors would be more likely to adopt sustainable products and work with NGOs to promote those products.
To find out, researchers looked at data for all U.S. utilities from 2002 to 2010, which included information on whether the utilities adopted a green energy program and how many customers bought green energy. The research team then tracked which coal-fired power plants were stigmatized and blacklisted by the environmental organization EIP, based on how many “dirty kilowatts” the plants produced.
They then contrast this data with the number of environmental NGOs located in the same county as the electricity provider. They controlled for the size of the electric company, its wind power capacity, the state’s regulatory support for renewable energy, and the region’s political orientation, since support for renewable energy projects is tied to ideology.
A path to the development of the green energy market
The researchers found that the stigma of “dirty” energy—and pressure from environmental NGOs—helped grow the green energy market.
Companies that used coal-fired power plants labeled as dirty were 2.15 times more likely to adopt a green energy program than other utilities, they found.
“That’s a pretty strong effect,” says King. “Sometimes we think of a market as just good and bad actors, but this shows that the ‘dirty’ utilities have the strongest incentive to embrace sustainable technology.”
The density of environmental NGOs in a county also made a difference: An increase of one NGO per 10,000 residents in an area meant an energy provider was 1.4 times more likely to adopt a green energy program, and customers were 0.26 times more likely to choose one of the programs. NGO density had an even greater effect on dirty coal power plants: these utilities were 40 times more likely to adopt a green energy program.
“This shows that stigma alone would not help a shift to green energy,” says King. “Utilities need partners in NGOs to help market it to the right customers. NGOs are willing to do this because they want to push for real changes that are good for the climate.”
After all, King continues, “there has to be demand for this market to grow.”
Indeed, utilities were more likely to adopt green energy programs in high-income, Democratic counties (where consumer support for renewable energy tends to be higher), while utilities were less likely to do so in areas with oil and gas – mining industries.
“Customers have to be willing to pay,” says King.
Sustainable marketing opportunities
Not only do energy companies get free marketing from NGOs, they often do nice guy when they offer greener alternatives. When TXU Energy began offering solar power in 2010, for example, elected officials and environmental NGOs praised the company.
Research shows that activists aren’t always bad for companies — they can also be allies that help companies achieve their strategic goals. “When companies choose to partner with activists, it creates a viable path for marketing opportunities that you wouldn’t otherwise have,” says King.
However, the research focused on an emerging green energy market that took place years ago in the 2000s. Since then, backlash against renewables has stunted the growth of these markets—a phenomenon King is now studying.
“Any time we go through transformative political change, it creates backlash,” he says. “Sometimes it’s strong for a few years and then dissipates, but it depends on political choices. The deflation law has accelerated growth in this market over the past two years, but we won’t know until after the election how much more dramatic the backlash against green energy can become.”
