When rapid changes are happening outside our organizations, having tools for strategic and nimble decision-making is more important than ever. One powerful tool that both nonprofits and businesses can use is an environmental scan.
Environmental scanning allows leaders to:
- Gather data about their organization’s current external environment.
- Evaluate the potential impact of positive and negative environmental factors.
- Make strategic decisions to guide their organization’s growth and sustainability.
In uncertain times like today, environmental scanning and similar tools are essential for making smart decisions and planning for the future.
What Is an Environmental Scan?
An environmental scan provides a snapshot of an organization’s current operating context. It details the external realities and conditions the organization faces—and explores how these realities could impact the organization’s decision-making, operations, and impact.
While an environmental scan describes current external conditions, its most important purpose is to guide future decision-making.
Environmental scans are often coupled with tools like a SWOT analysis that identify internal challenges and opportunities. Environmental scans are also a common part of the strategic planning process, which is designed to create a goal-oriented, stakeholder-informed strategy for the future of a nonprofit or business
To learn more about the strategic planning process and how it involves tools like environmental scanning, check out our comprehensive guide to nonprofit strategic planning.
What is the Difference Between an “Environmental Scan” and “SWOT Analysis?”
Both environmental scans and SWOT analysis are designed to provide a snapshot of an organization’s current operating context, with the aim of helping leaders prepare for future decision-making.
The primary difference between an environmental scan and a SWOT lies in the scope. A SWOT analysis typically identifies and addresses internal factors that can influence future decisions, while environmental scans encompass external realities capable of the same.
While each process is independently valuable, decision-makers will capture a more precise picture of their organization’s landscape if they conduct both an environmental scan and SWOT.
Methods for Environmental Scanning
There are multiple options for external environmental scans that allow organizations to address current realities at either a macro or micro level.
PESTLE Analysis
A PESTLE analysis allows organizations to assess macro-level external factors. The acronym and some traditional focus questions are as follows:
- Political: Determine how the current direction of national or, if relevant, global politics and policy may influence business development and growth.
- Economic: Consider broad economic trends like interest rates, inflation, taxes, stock market, overall economic growth, and other economic metrics. Also include how these or other factors may influence outside investment in your organization.
- Social: Identify socio-cultural factors and trends that may affect your work. This could include areas like consumer behavior, cultural attitudes, demographic shifts, or unmet community needs.
- Technology: Data infrastructure and security are becoming increasingly important for organizations of all kinds. When considering technology, evaluate hardware, software, communications tools, and cybersecurity. Is your equipment and technology up to date? Do your staff have the tools they need to do their jobs efficiently, including in times of system strain?
- Legal: Consider new laws and regulations that might impact your operations. For example, for nonprofits this could include changes in charitable giving deductions or policy changes that affect the program areas you work on.
- Environmental (or Ethical): Identify the environmental factors that may influence your operations, such as geographic location, weather, or climate change. Some versions of the PESTLE analysis also include ethical considerations, particularly in areas like accounting, management, marketing, partnerships, and social responsibility.
As you conduct a PESTLE analysis, you’ll want to also think through which aspects constitute opportunities versus threats—and where they may intersect with internal strengths and weaknesses.
STEEPLE Analysis
Another environmental scanning approach is the STEEPLE analysis, which offers a deep dive into external macro-environmental factors. Areas of analysis in STEEPLE include:
- Social
- Technological
- Economic
- Environmental
- Political
- Legal
- Ethical
STEEPLE takes the PESTLE one step further by considering both environmental and ethical factors. Like the PESTLE, according to Forbes, one of the benefits of the STEEPLE is that it “gets people thinking not only about how STEEPLE factors will play into organizational success but also what impact the organization is having or will have in those areas.”
SKEPTIC Assessment
The SKEPTIC assessment is similar to the PESTLE approach and addresses socio-demographics, competition, environment/economics, political/regulatory, technology, industries, and customers.
Environmental Scanning Alongside Planning Activities
One key for successful environmental scanning is ensuring that the results translate into strategy. As the Harvard Business Review explains:
By looking at the external conditions, in conjunction with internal attributes, a set of clear-cut and supported recommendations can be generated. And this should be your goal: Using an analytical tool to help you identify a wide range of possible actionable outcomes.
When used as part of a strategic planning process, tools like environmental scans encourage leaders to dig beneath the surface of everyday work and challenge assumptions. When we run strategic planning processes for nonprofits and businesses, we often see organizations reinvigorated by both the challenges and opportunities they discover.
