From Facts to Foils: Designing and Evaluating Counterfactual Explanations for Smart Environments

Abstract--Explainability is increasingly seen as an essential feature of rule-based smart environments. While counterfactual explanations, which describe what could have been done differently to achieve a desired outcome, are a powerful tool in eXplainable AI (XAI), no established methods exist for generating them in these rule-based domains. In this paper, we present the first formalization and implementation of counterfactual explanations tailored to this domain. It is implemented as a plugin that extends an existing explanation engine for smart environments. We conducted a user study (N=17) to evaluate our generated counterfactuals against traditional causal explanations. The results show that user preference is highly contextual: causal explanations are favored for their linguistic simplicity and in time-pressured situations, while counterfactuals are preferred for their actionable content, particularly when a user wants to resolve a problem. Our work contributes a practical framework for a new type of explanation in smart environments and provides empirical evidence to guide the choice of when each explanation type is most effective. Smart environments, such as smart homes, offices, and buildings, integrate sensor-enabled devices to support users in decision-making, monitoring, and managing abnormal situations [1], [2]. The rapid adoption of these environments is fueled by advances in the Internet of Things (IoT) and Artificial Intelligence (AI), decreasing device costs, and improved system integration [3]-[5]. Rule-based systems are a prevalent approach for implementing automation in smart environments, by executing predefined rules when certain conditions are met [6], [7].