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PRESENTING THE TOOL

What it is?

Context analysis - PESTEL is a method, originally intended for organisational analysis, entailing a variety of steps and techniques to gather relevant knowledge on the macro environment, needed to understand key factors which may impact (direct or indirectly) the intervention. "PESTEL" refers to a mnemonic guideline of the domains it considers: Political, Economic, Social (or Socio-cultural), Technological, Environmental and Legal. PESTEL is built as a guiding check list, helping to systematize the collection of information on environment and to identify specific relevant factors - i.e. economic trends, social attitudes, technological developments, etc.- that are significant in the intervention design phase.

While the needed analysis may depend from the context of the intervention, operational managers must systematically perform the mandatory ones, linked to defined political priorities, covering in particular Gender equality and women's empowerment  (see Gender Equality and Non-discrimination: resource page), Environment and climate change (see Environmental and climate risk screening), and Conflict analysis and sensitivity (see Guidance for conflict analysis).

What can it be used for?

Context analysis - PESTEL is a 'navigation tool' which support organising information on macro environment and understanding interventions' specific environment. This allows a clearer identification of entry points and evidence-based analysis that will sustain the intervention logic.
It is closely linked, in the design phase, to Public Policy Analysis (PPA) and Stakeholder analysis, which are often, in preliminary identification phase, integrated in the PESTEL.

When can it be used?

Context analysis is the initial step when planning an intervention, but it implies an iterative approach, as change in the context have to be systematically monitored to ensure feasibility and continuous relevance of the intervention. It may prove particularly useful when starting activities in a new sector of intervention or following major contextual changes.

Who can use it?

Context analysis can be used by EU staff and, once the intervention is formulated, by relevant partners.

What are its strengths?

Assessing the context through different dimensions help having a strategic vision of possible interventions, which are seen in different perspectives.
Being a general guidance, PESTEL allow for great flexibility in the choice of tools to collect information and knowledge, while avoiding too dispersive analysis and loosing focus.

What are its limitations?

The broadness of analysis may render it superficial; the choice of dimension to be more deeply assessed may be instrumentally based on availability of information more than intervention design requirement.

PRACTICAL APPLICATION

Key elements

Analysing with the support of PESTEL methodology entails four key steps:

  • Step 1: Clear definition of the scope (e.g. regional, national, sectoral, thematic analysis) and of the indicative objectives of the analysis. If the scope/objectives are not specific, context analysis may provide good quality but too generic information. In EU Delegations, scope and objectives may be defined during the programming phase, and will systematically include mandatory analysis linked to political priority (Gender equality and women's empowerment, Environment and climate change, Conflict sensitivity and resilience).

  • Step 2: Choice of factors. Each macro dimension can be assessed through different factors. The list of factors may greatly vary, and similar ones can assume different weight depending on the scope of the analysis.


Table: Sample of factors to consider in PESTEL

POLITICAL DIMENSION

Refers to the political systems in term of state structure, governance and policy-making process, both formal and informal. Some factors to be analysed could be:

  • Type, of state (i.e. centralized vs federal) and regime (i.e democratic vs authoritarian)

  • Role and organizational shape of the state

  • Electoral processes

  • Power sharing between tier of the state, or between the state and other non-state actors;

  • Public Policy analysis (policy framework, policy relevance and credibility);

  • Coherence of existing policies both with internal and international commitments

ECONOMIC DIMENSION

Refers to the economic structure of the country, both formal and informal.
Some factors to be analysed could be:

  • Respective role of state and private sector

  • Market typology

  • Formal vs informal and illegal economy

  • Relation and relative weight of local, national and international economy

  • Banking system…

SOCIAL (or SOCIO-CULTURAL) DIMENSION

Refers to the social characteristic of the country, including traditional values and attitudes. Gender focused analysis are particularly relevant for EUD, as gender mainstreaming is requested in all interventions. Some factors to be analysed could be:

  • Demographic composition

  • Social structure

  • Migration trend

  • Ethnic composition

  • Cultural diversity

  • Religious diversity

  • Typology of existing social institutions

TECHNOLOGICAL DIMENSION

Refers to the availability of technology in the country, both in term of hard and soft competencies. This may include:

  • Available technology (per sector, at local, national or regional level)

  • Conformity with intervention quality standard

  • Accessibility of technology by population

  • Dissemination and access to new technologies

  • Engagement in development and research

  • Performance of higher education

  • State investment in technological development and dissemination

ENVIRONMENTAL DIMENSION

Refers to environmental issues both at local and global level (i.e. climate change); it is particular relevant for EUD as environmental assessment is mandatory for all interventions. Il may include:

  • Geography (regional, national and local level)

  • Weather trend (regional, national or local level)

  • International commitment an national regulation

  • Implementation of existing regulation (willingness, capacity, credibility)…

LEGAL DIMENSION


Refers to the legal framework in place. It is particularly relevant for EUD as commitment to Human Rights is intrinsically connected to all EUD interventions through the Right Based Approach. It may include:

  • Commitment to international convention / treaties

  • National legislation

  • Alternative sources of legislation (customary law)

  • Coherence between national legislation and adherence to international commitments

  • Implementation willingness / capacity

  • Ethical issues (i.e. privacy)


  • Step 3: Exclude unfeasible interventions and identify more promising entry points. Existing contextual factors will be critically confronted, against the specific EU mandate in the country as defined in the programming phase.

  • Step 4: Use of the Context Analysis findings to inform the intervention logic. PESTEL analysis findings will inform more focused analysis, moving toward the design of a specific intervention rooted in the context and in line with the EU mandate.


Requirements

Data/Information

The starting point is often a literature review, which will include EUD programming documents and previous Intervention reports. Further requirement will depend on the level of analysis needed in relation to the expected entry point.

Time

N.A. Depending on dimensions' factors choice and already available material, time required can sensibly vary. A minimum of 2 weeks is however generally needed to acquire an understanding of the macro environment.

Skills

N.A.

Facilities and materials

N.A.

Financial costs and resources

N.A.

Tips and tricks

When analysing the context, it is not necessary to capture all the detail – some factors will be excluded on the base of the EUD operational framework as defined during programming phase. However, it worst investing in a complete context analysis: its finding will inform all EUD inteventions, and, if regularly update, can provide long lasting information.

PES dimensions (Political, Economic and Socio-cultural analysis) will often provide key elements for subsequent and more detailed Stakeholder and Public Policy Analysis.

REFERENCES

Where to find it?

While the needed analysis may depend from the context of the intervention, operational managers must systematically perform the mandatory one, linked to defined political priorities. In particular:

Gender equality and women's empowerment: Gender Equality and Non-discrimination: resource page

Environment and climate change: see Country environmental profile and regional environmental profile, Environmental and climate risk screening, Environment and climate change integration: other resources (sector notes and quick tips)

Conflict sensitivity and resilience: see Guidance for conflict analysisEU staff handbook on operating in situations of conflict and fragilityEU guidance for resilience analysis.

Complementary methodologies and tools

The European Commission, 2010. Tool 5- Political economy and stakeholder analysis. Tools and Methods Series. Reference Document Nº6. Toolkit for Capacity Development. Pages 37-44.

The European Commission, 2012. Tools and Methods Series. Concept Paper Nº3. Mappings and Civil Society Assessments.

The European Commission, 2016. Tools and Methods Series. Reference Document Nº23. Supporting decentralisation, local governance and local development through a territorial approach.

The International Bank for Reconstruction and Development / The World Bank, 2007. Tools for Institutional, Political, and Social Analysis of Policy Reform.

UNICEF, 2015. SWOT and PESTEL. Understanding your external and internal context for better planning and decision-making.

United Nations Development Group (UNDG), 2017. Common country analysis. UNDAF Companion Guidance.

United Nations Development Programme (UNDP), 2012. Institutional and context analysis – Guidance Note.

United Nations Development Programme (UNDP), 2018. Guidance Note: Institutional and Context Analysis for the Sustainable Development Goals.

United Nations Universal Periodic Review: UN Human Rights Office of the High Commissioner

The European Commission (EC), DG INTPA.  Country fiches (Internal use only)

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