Environmental Factors in Your PESTEL Analysis

Part 6 of 7

Introduction

It wasn’t that long ago that if you asked a business leader how she intended to mitigate the issues related to climate change, corporate social responsibility (CSR), or sustainability, she might have wondered what you were talking about. Not today.

In 2023 and beyond, companies pursuing a strategic opportunity such as the launch of a new product or service, or a move to a new market, will almost certainly be compelled to consider the issues above which, collectively, fall into the Environmental Factors category of the PESTEL analysis. Indeed, environmental factors have become critical macro-economic influences that every business must consider as they complete their PESTEL Analysis.

Examples of Environmental Factors

A perfect example of how environmental factors impact companies is the restaurant industry. Each year, we write a large number of business plans for restaurant entrepreneurs; because of this, we know that if you are thinking of opening a new restaurant, you might want to think in terms of sustainability. In restaurant terms, this means that you will use natural ingredients that, if possible, will be locally sourced from farmers that raise crops and livestock in a way that does not damage the land or other natural resources, preserving it for future generations. In addition to sustainably sourced food, you will want to purchase highly rated equipment and fixtures (including kitchen, A/C, etc.) for maximum energy efficiency.

The table below lists just some of the topics that might be evaluated when considering environmental factors:

Environmental Factors Case Studies

Here are several recent examples of assignments we have completed for clients where environmental factors influenced significant decisions during the launch of their business:

• We recently advised a client developing a biogas filtering technology that will capture biogas from farms and convert it into pure natural gas, readying it for sale to individual and commercial customers.
• Our client in a Sub-Saharan country in Africa is building a large solar plant. Once completed, he will sell electricity to mining companies that are currently not able to buy enough energy from a government-owned supplier. What makes this undertaking even more interesting is that he is distributing power over the government-owned distribution lines.
• Environmental tourism, often referred to as eco-tourism, has become extremely popular. According to Statistica, 24% of international travel consumers (318 million) reported that green travel is very important to them. We recently completed a business plan assignment for a global B2B eco-tourism e-commerce business. In doing so, we learned that travelers who care about the environment do not want to take cruises on huge ships with an equally huge carbon footprint, don’t want to stay in large corporate owned hotels for the same reason, and would prefer travel on foot or by bicycle once they have arrived at their destination.
• One of our clients is a specialized home improvement contractor that provides residential energy audits and energy efficiency upgrades and repairs to homeowners that wish to find ways to save money on their energy usage and reduce their carbon footprint. While the evidence is largely anecdotal, can you imagine even one household that does not have an interest in achieving energy savings or improving the comfort or environmental quality of their home?
• There is a shopping center located in Costa Mesa, California, that distinguishes itself from the many other retail centers with the following description of itself on its website: “The CAMP is a green, eco-friendly retail campus dedicated to an active, healthy lifestyle mindful of environmentalism and supportive of the local community. The CAMP balances culture, sophistication, and functionality, blurring the boundaries between nature and the everyday bustle of life in Orange County, California.” Our client was so attracted to the focus on environmentalism that it moved its business to The Camp.

Conclusion

Environmental factors affect every company in every country. Some businesses are motivated simply to save money by increasing energy efficiency, while others are motivated by being better members of their communities. No matter the motivation, all successful leaders today must evaluate environmental factors when considering strategic changes to their business. Moreover, for companies considering moving to or expanding in a new country, they are well advised to complete a PESTEL analysis and give careful attention to the new country’s environmental issues, which are almost certainly going to be different from similar matters in their home country.

This is Part 6 of our series on PESTEL analyses. Go to Part 5 here. Our next and final post in this series will be on the Legal factors to be considered in a PESTEL analysis.

Other Articles in the PESTEL Analysis Series

• Put Your PESTEL to the Mettle (Part 1 of 7)
• Political Factors in your PESTEL Analysis (Part 2 of 7)
• Economic Factors in your PESTEL Analysis (Part 3 of 7)
• Social Factors in your PESTEL Analysis (Part 4 of 7)
• Technological Factors in your PESTEL Analysis (Part 5 of 7)
• Environmental Factors in Your PESTEL Analysis (Part 6 of 7)
• Legal Factors in Your PESTEL Analysis (Part 7 of 7)