The distinction between the legal and political components of the PESTEL framework is often hard to make – political decisions are often enacted into laws, so there are clear connections between the two parts. There however distinctions that can be made between political factors (associated with a government) and legal parts (associated with the courts and regulators).
This article explores the difference between the political and legal components of the PESTEL framework.
Overview of the political and legal environment
The political environment
The political component of a firm’s broad environment concerns decisions made by the government. These may include decisions on the legality of various industries, taxation policies, or environmental standards – essentially all decisions made by a local or national government.
In the US context, at the Federal level, you can think of this as decisions made by Congress and House of Representatives, as well as the White House. Similar sets of political decisions will also occur at both the State and local levels.
The legal environment
The legal component of the PESTEL framework relates to how laws are implemented and enforced – for example, consumer-focused laws, anti-trust legislation, environmental laws, and employment laws that companies must follow.
The legal environment will include the courts, as well as government agencies responsible for enacting regulations.
At the US level, some major regulators agencies that can impact organizations include:
- Environment Protection Agency (EPA): Responsible for enforcing environmental regulations.
- Federal Communications Commission (FCC): Responsible for communication regulations such as TV, radio, and telephone.
- Equal Employment Opportunity Commission (EEOC): Responsible for enforcing employment-related regulations.
- Federal Trade Commission (FTC): Responsible for trade regulations.
- Food and Drug Administration (FDA): Responsible for regulations impacting the safety and approval of food and drugs.
- Occupational Safety and Health Administration (OSHA): Responsible for regulations impacting safety procedures.
Differences between the political and legal environment
There are clear connections between the legal component of the PESTEL framework and the political – many political decisions are enacted in laws. One way of thinking of the difference is to make the distinction between what the laws and regulators are (political) and how the laws and regulations are implemented (legal).
Often regulators have large discretion in what companies they will prosecute and the penalty associated with various wrongdoings. The uncertainty for firms is not in the political arena per se, but rather the legal of how the enacted laws will be implemented.
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