How to embed DEI into a PESTLE analysis: Explainer
- Organizational culture change
- Diversity and Inclusion governance
*Catalyst offers research-backed inclusive workplace solutions
Executive summary
Why your organization should conduct a PESTLE analysis now
Experts across domains agree we have reached a point where change is occurring faster than at any other time in human history, and it is accelerating.1 To adapt successfully to the dynamic forces continuously reshaping the world in which we live and work, your organization requires foresight—what a PESTLE analysis offers.
What Is a PESTLE Analysis?
A PESTLE analysis is a strategic management and business analysis framework that enables organizational leaders to discover and account for current and emergent external forces that are most likely to impact their company.
A PESTLE analysis:
- Identifies macro-level trends and conditions in the following areas:
- Political (P)
- Economic (E)
- Social (S)
- Technological (T)
- Legal (L)
- Environmental (E)
- Can focus on any geographic scope a company decides is most relevant to their operations, such as a region, country, or a new or existing market.
- Can be practiced by employees across areas of the organization.
- Extends the PEST analysis, which has roots going back nearly 60 years.2
Organizations that conduct a PESTLE analysis gain a preview of the future that enables them to capitalize on opportunities and avoid threats. But a PESTLE analysis will not be as effective as possible if your leaders are not looking at it through the lens of diversity, equity, and inclusion (DEI).3
Chief diversity officers and other senior leaders: Use this guide to learn how to conduct a PESTLE analysis that will put your organization on a path to create more inclusive and equitable workplaces and a more inclusive and equitable world.
Centering DEI in your PESTLE Analysis
An effective DEI strategy and a successful organization are two sides of the same coin. Standard PESTLE analyses will surface macro-level trends—but if your organization’s questions, findings, and subsequent actions are not evaluated using an inclusive lens, they may fail to account for, or even might exacerbate, existing inequities and exclusionary practices. For example:
- A scan of the current technology landscape (the “T” in PESTLE) would undoubtedly reveal that AI has emerged as a technology that companies of all sizes and in all industries are scrambling to leverage in both their internal operations and external products and services.4 Yet with each passing day, we learn more about the ways that AI can exacerbate bias, perpetuate misinformation, and generate inequitable results. Leaders who approach AI adoption without explicitly acknowledging and proactively guarding against biases, utilization gaps, and other disparities run the risk of doing harm to their employees, customers, reputation, business, and society.
- Scanning the global legal landscape (the “L” in PESTLE), leaders would be remiss if they didn’t call out the quickly changing legislation around reproductive freedom. Since 2020, several countries including Argentina, Colombia, Mexico, New Zealand, South Korea, and Thailand have loosened restrictions on abortions, and France enshrined the right to abortion in its Constitution.5 In the same time frame, two countries—Poland and the United States—have moved to restrict abortion rights and Honduras enshrined a total ban in its constitution.6 Global multinational leaders must take note of these opposing trends and how they will affect their workforce. Women’s rights are a contentious issue across the globe, and without codified protections, they will remain on the chopping block of authoritarian regimes. A PESTLE analysis with a DEI lens can assess these macro level phenomena so that leaders can proactively establish workplaces that support all employees across differing social contexts and political environments. This can include adjusting or expanding existing healthcare benefits, mental health services, legal services, leave policies, etc.
By scanning the external environment and considering the impact(s) of macro-level trends on various groups of people, especially people from traditionally marginalized communities, organizations unlock the potential to not only survive the coming shifts but thrive and adapt.
Distinguishing drivers of decisions
When and how an organization can apply a DEI lens during its strategic decision-making processes will depend on whether desired outcomes are driven by a need to achieve regulatory compliance or a wish to express corporate values. Both of these scenarios allow for the application of DEI principles, but in different ways, so it is important to make this distinction.
- In compliance-based scenarios, an organization’s actions are required to remain in alignment with external policy changes.
- In these scenarios, organizations can bring a DEI lens to strategic decision-making by assessing the internal and external impacts of regulatory compliance on various groups, and by doing whatever they can to promote equity and mitigate harm.
- For example, organizations must stay informed about and address new regulations about carbon emissions both to ensure that they are operating in the most responsible way and to avoid penalties. Actions may include carbon accounting, which enables organizations to comply with government reporting requirements, report their sustainability impact to stakeholders, and implement carbon reduction strategies that fight climate change, which disproportionately impacts marginalized and vulnerable groups (UN figures indicate that 80% of the people displaced by climate change are women ).7
- In values-based scenarios, external dynamics provide the organization with an opportunity to consider if and how it will respond, given its core values.
- In these scenarios, organizations can bring a DEI lens to strategic decision-making by assessing the internal and external impacts of a proposed response on various groups, and taking action that aligns with core organizational values.
- For example, the recent backlash to DEI efforts has challenged organizations to decide if and how they will continue work in this area.8 Any response—whether to maintain, modify, increase, or abandon DEI efforts and then whether to promote or downplay any existing efforts—should align with the organization’s core values. Organizations committed to building a diverse, inclusive, and equitable workplace will recognize that the social and economic benefits that accrue from maintaining internal and external DEI initiatives outweigh the costs of any potential backlash.
PESTLE analysis with a DEI lens how-to guide
Get started with your PESTLE analysis using our tips and template. This accessible guide to identifying important aspects of the business environment will help your organization lead in the future of work.
Tips for engaging in a PESTLE analysis with a DEI lens
  |
|
 |
|
 |
|
PESTLE Analysis Guide
1. Choose which macro areas you will consider
 Political |
|
 Economic |
|
 Social |
|
 Technological |
|
 Legal |
|
 Environmental |
|
2. Identify trends
- What macro trends in this area have the potential to affect business opportunities or bring threats?
- Have we identified not only mainstream trends but also emergent trends?
- How are we limited in assessing the trends in this area?
- What haven’t we thought about?
- Do the trends we’ve identified only reflect the experiences and voices of the largest, most powerful, or most vocal groups?
- What demographic groups are most likely to be impacted by these trends?
- What steps can we take to mitigate potential harm generated by these trends to our business, employees, and customers, especially those from marginalized communities?
- What additional questions can we ask?
3. Develop actions
- What actions can we take to position our organization and stakeholders for success given the trends we’ve identified? How will we know? What feedback mechanisms do we have in place?
- How will the proposed actions impact different groups of people positively or negatively? How will we know? What feedback mechanisms do we have in place? Consider:
- Both internal (e.g., employees) and external (e.g., customers, broader market/community) stakeholders
- Different demographic groups, particularly marginalized groups.
- What can we do to prevent any potentially negative impacts?
- Will these actions create any barriers for specific demographic groups?
- Do these actions align with our values?
- Do these actions align with our overall approach to diversity, equity, and inclusion?
- Are there additional stakeholders we should involve for feedback on the proposed actions?
- Is our proposed response compliance-based or values-based?
- Who will be accountable for implementing each action?
- When should we conduct our next analysis of this area, given the frequency of changes?
Suggested questions to ask, by role and area
Below we suggest questions to consider during your PESTLE analysis. This is not an exhaustive list, but these prompts can help you jump start your analysis with an inclusive lens. Some questions may be relevant to more than one organizational area or initiative; you and your team should consider your specific issue area(s), concerns, organizational priorities, and stakeholders to determine the questions that are most relevant.
Explore the roles below.
Explore the roles
Executives, General counsel
Human resources
Marketing/Communications
Product and service development
Diversity, equity, and inclusion
Technology
Sample use case: Responsible AI
Consider the following example of a PESTLE analysis with a DEI lens applied to a current issue: The responsible use of artificial intelligence (AI). Although the charge of implementing a responsible AI framework would typically fall under the scope of a Chief Technology Officer, not all organizations have such roles and AI will impact everyone regardless of their title and responsibilities. Note that the suggested questions and proposed actions invoke the consideration and roles of stakeholders across the organization.
PESTLE Analysis: Technology (T)
Trend: Responsible AI |
|
Executives |
|
General counsel |
|
Human resources |
|
Marketing / Communications |
|
Product and service development |
|
Proposed actions: Responsible AI |
|
Executives |
|
General counsel |
|
Human resources |
|
Marketing / Communications |
|
Product and service development |
|
How to cite: Jackson, D. & Van Bommel, T. (2024). How to embed DEI into a PESTLE analysis: Explainer. Catalyst.
Endnotes
- Chima, A. & Gutman, R. (2020, October 29). What it takes to lead through an era of exponential change. Harvard Business Review; Espindola, D. & Wright, M. W. (2020). The exponential era: Strategies to stay ahead of the curve in an era of chaotic changes and disruptive forces. Wiley-IEEE Press.
- Aguilar, F. J. (1967). Scanning the business environment. Macmillan; Vasileva, E. (2018, October 18). Application of the PEST Analysis for strategic planning of regional development. In 49th International Scientific Conference: Quantitative and qualitative analysis in economics (p. 223-229).
- Cox, G. & Lancefield, D. (2021, May 19). Five strategies to infuse D&I into your organization. Harvard Business Review.
- Haan, K. & Watts, R. (2023, April 24). How businesses are using artificial intelligence in 2024. Forbes Advisor.
- Abortion law: Global comparisons. (2024, March 7). Council on Foreign Relations.
- Abortion law: Global comparisons. (2024, March 7). Council on Foreign Relations.
- Halton, M. (2018, March 7). Climate change “impacts women more than men”. BBC News.
- Harper, S. (2024, January 15). Why a “lay low” DEI strategy is especially bad right now. Forbes; Shaffer, E. & Torrez, B. (2024). How to talk about diversity with employees to achieve your company’s objectives. Catalyst.