The L in STEEPLE

Why the Legal dimension deserves separate analysis from the Political in strategic foresight

Introduction

In the standard STEEPLE framework, the L stands for Legal—the codified rules, regulations, and judicial systems that define the boundaries of organizational action. Yet for decades, this dimension remained invisible, absorbed under “Political” factors in earlier frameworks like PEST.

The separation of Legal from Political was not academic pedantry. It reflects a fundamental shift in how organizations must understand their operating environment. In a world of supranational legislation, regulatory complexity, and legal pluralism, treating law as merely an output of politics leads to strategic blindness.

This article examines why the L-dimension matters for foresight practitioners, tracing its historical emergence, theoretical foundations, and practical operationalization. The core argument: Legal factors operate according to different logics than Political factors, require different analytical approaches, and demand different strategic responses.

Understanding this distinction is increasingly critical as the “pacing problem”—where technology evolves exponentially while regulation changes incrementally—creates growing uncertainty about the legal environment of the future.

Historical Genesis

No Single Inventor

Unlike many management frameworks that emerge from a single seminal publication, the L-dimension has no identifiable single origin. Its development exemplifies emergent practice evolution—a pattern described in the main STEEPLE article where tools develop organically through consulting practice rather than formal academic publication¹.

There is no “inventor of the L” to cite. The separation emerged gradually through the 1980s and 1990s as practitioners recognized that the four-factor PEST model was inadequate for increasingly complex regulatory environments.

The Evolution Chain

The framework’s development can be traced through key milestones:

First Documented Formalization: Phillips, Doole & Lowe (1994)

The textbook “International Marketing Strategy: Analysis, Development and Implementation” by Chris Phillips, Isobel Doole, and Robin Lowe (Routledge, 1994) represents one of the first and most influential texts to explicitly use the acronym SLEPT (Social, Legal, Economic, Political, Technological)³.

Why did these authors separate Legal? In international marketing, legal differences between jurisdictions are often the most significant operational barriers:

• Can comparative advertising be used?
• What labeling requirements apply?
• How is intellectual property protected?
• What product liability standards exist?

For international marketers, law was not an abstract political force but a concrete, operational rulebook varying from market to market—even between politically similar countries. A British company selling to Germany faced different legal requirements than selling to France, despite similar political systems.

The UK Origin Context

The L-dimension’s emergence is primarily a British phenomenon, shaped by the specific experience of EU integration. The Single European Act (signed 1986, effective 1987) fundamentally altered how UK organizations experienced the relationship between politics and law⁵.

Before the Single European Act, UK politics and law were largely synchronous—Parliament in Westminster was sovereign, and laws directly reflected the governing party’s agenda.

After 1987, British organizations faced a new reality:

• Political (P): The Thatcher government pursued deregulation and reduced worker protections
• Legal (L): EU directives on working time, environmental standards, and consumer protection imposed stricter requirements

This divergence made the old PEST model obsolete. Law (supranational, EU-driven) operated independently from—sometimes in opposition to—national politics. The L in PESTLE thus historically stands partly for “Legislation from Europe.”

The Fahey & Narayanan Misattribution

A common citation claims that Fahey and Narayanan introduced PESTLE in their 1986 book Macroenvironmental Analysis for Strategic Management. Research indicates this is likely a misattribution—they probably used PEST (4 factors), not PESTLE⁶. The expansion to include separate Legal and Environmental dimensions appears to have occurred in UK-based literature in the 1990s, not US-based literature in the 1980s.

This correction matters because it shifts our understanding of PESTLE’s origins from American strategic management to British marketing and professional education.

Theoretical Foundation

Coercive Isomorphism: Why Legal Compliance is Existential

The theoretical justification for treating Legal separately from Political draws from institutional theory, particularly the concept of coercive isomorphism developed by DiMaggio and Powell (1983)⁷.

DiMaggio and Powell identified three types of institutional pressure that cause organizations to become similar:

1. Coercive: Pressures from powerful external actors imposing rules
2. Normative: Pressures from professional standards and expectations
3. Mimetic: Pressures to copy successful peers in uncertain environments

While DiMaggio and Powell grouped legal and political pressures together under “coercive,” the STEEPLE framework recognizes a crucial operational distinction: political pressures can be resisted or influenced; legal requirements must be obeyed. Organizations that fail to conform to legal requirements face sanctions, loss of operating licenses, and delegitimization—consequences that are immediate and existential rather than gradual and negotiable.

A change in government (Political) creates uncertainty; a change in law (Legal) creates mandatory compliance requirements. These demand different analytical approaches and strategic responses.

Regulatory Space Theory: Law as Strategic Arena

Regulatory Space Theory, developed by Hancher and Moran (1989), transforms our understanding of the L-dimension from passive compliance to active strategic engagement⁸.

Traditional views treat regulation as external constraint—something that happens to organizations. Regulatory Space Theory reconceptualizes regulation as a contested arena where multiple actors interact to shape rules:

• Government agencies draft regulations
• Industry associations lobby for favorable terms
• Companies participate in standard-setting
• NGOs push for stricter requirements
• Courts interpret ambiguous provisions

This means organizations can occupy and shape their regulatory space through:

• Lobbying and policy engagement
• Participation in industry standard-setting
• Regulatory capture strategies
• Strategic litigation
• Compliance leadership that shapes future standards

The L-dimension thus becomes a strategic opportunity, not merely a compliance burden.

The Political-Legal Pipeline

The conceptual justification for separating P and L can be understood through the Political-Legal Pipeline model⁹:

• Political (P) = The Pipeline: Intentions, debates, power shifts, policy proposals
• Legal (L) = The Status Quo: Binding rules, codified requirements, compliance obligations

A government announcing interest in AI regulation is Political—it signals direction but creates no immediate obligations. The EU AI Act becoming law is Legal—it creates specific, enforceable requirements.

This distinction matters strategically:

Conflating these leads to strategic errors: either over-reacting to political signals that never crystallize into law, or under-preparing for legal changes that seemed politically unlikely.

Practical Operationalization

Subcategories of the L-Dimension

The Legal dimension encompasses multiple distinct regulatory domains, each with its own logic and evolution:

Employment Law

• Working time regulations
• Minimum wage requirements
• Health and safety standards
• Anti-discrimination protections
• Collective bargaining rights

Consumer Protection

• Product safety standards
• Advertising regulations
• Warranty requirements
• Consumer contract terms
• Right to repair legislation

Data Protection

• Privacy regulations (GDPR)
• Data localization requirements
• Cross-border transfer rules
• Consent and transparency obligations
• Data subject rights

Competition Law

• Antitrust enforcement
• Merger control
• State aid rules
• Platform regulation (DMA)
• Market dominance restrictions

Intellectual Property

• Patent systems and duration
• Trademark protection
• Copyright frameworks
• Trade secrets
• Standard-essential patents

Industry-Specific Regulation

• Financial services (banking, insurance)
• Healthcare and pharmaceuticals
• Energy and utilities
• Telecommunications
• Transportation

Scanning Methods

Effective Legal scanning requires specific methodologies:

Regulatory Horizon Scanning

Systematic monitoring of the regulatory pipeline:

• Proposed legislation in relevant jurisdictions
• Regulatory agency consultations
• Court cases that may establish precedent
• International treaty negotiations
• Industry standard development processes

Soft Law Monitoring

Soft law—non-legally binding instruments like guidelines, principles, and voluntary standards—often precedes hard law¹⁰. The “hardening” trend shows soft law frequently becoming binding:

• UN Guiding Principles on Business and Human Rights (2011) → French Duty of Vigilance Law (2017) → German Supply Chain Act (2023)
• OECD Privacy Guidelines (1980) → EU Data Protection Directive (1995) → GDPR (2016/2018)

Monitoring soft law provides early warning of future legal requirements.

Regulatory Sandboxes

An innovation in regulatory practice, regulatory sandboxes allow organizations to test new products and services under relaxed regulatory requirements¹¹. Pioneered by the UK Financial Conduct Authority in 2016, now adopted by 50+ countries.

For foresight practitioners, sandboxes signal:

• Regulators’ openness to innovation in specific domains
• Likely direction of future permanent rules
• Opportunities to shape emerging frameworks

Cross-Impact with Other STEEPLE Factors

Legal factors rarely operate in isolation. Effective analysis maps cross-impacts:

Current Relevance

The Pacing Problem

The Pacing Problem describes the observation that technology changes exponentially while legal, social, and economic systems change incrementally¹².

This creates a growing gap between technological capability and regulatory clarity. The concept builds on the Collingridge Dilemma (1980):

• When change is easy (early technology development), the need for regulation is not yet apparent
• When the need for regulation becomes clear, the technology is entrenched and change is difficult

For foresight practitioners, the pacing problem means:

1. Legal uncertainty is increasing, not decreasing
2. Regulatory lag creates windows of opportunity—and risk
3. Organizations must anticipate legal responses rather than waiting for clarity
4. Legal Foresight becomes a strategic capability

The Brussels Effect

Political scientist Anu Bradford documented the Brussels Effect—the EU’s unilateral power to regulate global markets through market size and regulatory capacity¹³.

Key dynamics:

• De facto effect: Companies standardize on EU rules globally to avoid managing multiple compliance systems
• De jure effect: Other jurisdictions copy EU regulations to maintain compatibility

Practical implications:

• Even non-EU organizations must monitor EU regulatory developments
• GDPR became a de facto global standard
• EU AI Act will likely shape global AI governance
• The EU is the primary source of L-dimension disruption for many organizations

Legal Foresight as Emerging Discipline

Legal Foresight is emerging as a distinct discipline bridging traditional legal analysis with futures studies methodologies¹⁴.

The Liquid Legal Institute (Germany) launched its Strategic Legal Foresight Office in 2025, pioneering activities including:

• Systematic regulatory trend monitoring
• Legal scenario development
• Cross-border regulatory comparison
• Digital Legal Exchange (DLex)

This represents a transformation of Legal from reactive compliance function to proactive strategic capability—recognizing that in a rapidly changing world, waiting for legal certainty is itself a strategic choice with consequences.

Contemporary Examples

GDPR (2016/2018)

The General Data Protection Regulation exemplifies the Brussels Effect described above:

• Influenced legislation in Brazil (LGPD), Japan, California (CCPA), and elsewhere
• Created new compliance function (Data Protection Officer)
• Established consent and transparency as global baseline expectations

EU AI Act (2024)

The first comprehensive AI regulation globally:

• Risk-based classification of AI systems
• Prohibited practices (social scoring, certain biometric uses)
• Requirements for high-risk AI (transparency, human oversight)
• Will likely shape global AI governance through Brussels Effect

Digital Services Act (DSA) and Digital Markets Act (DMA)

Platform regulation addressing market power:

• New obligations for “gatekeepers” (very large platforms)
• Content moderation transparency requirements
• Interoperability mandates
• Signals direction of global platform regulation

Blind Spots and Limitations

Soft Law Undervaluation

Despite the “hardening” dynamics described in Soft Law Monitoring above, standard STEEPLE analysis often focuses exclusively on “hard law” (enforceable statutes) while undervaluing soft law¹⁵.

This creates blind spots because soft law influences stakeholder expectations even before legal mandate, and non-compliance can create reputational and market access risks. Organizations that wait for formal legislation miss early warning signals and the opportunity to shape emerging frameworks.

Best practice: Treat soft law as “proto-Legal” in scanning activities.

Legal Pluralism

The standard STEEPLE framework assumes state-centric law—formal legislation and court systems. Yet globally, over 80% of disputes are resolved through non-state justice systems¹⁶:

• Customary law and traditional courts
• Religious legal systems
• Private arbitration and mediation
• Industry self-regulation
• Online dispute resolution

This creates a Western bias in standard frameworks. Organizations operating in the Global South or in contexts with strong non-state legal traditions need adapted analytical approaches.

Private Regulation Gap

Increasingly significant regulatory power sits outside formal legal systems:

• Platform policies: Facebook/Meta, Google, Apple content and app store rules
• Industry standards: ISO, technical standards organizations
• Certification schemes: Fair Trade, organic certification, sustainable sourcing
• Insurance requirements: De facto compliance standards through insurability
• Investor requirements: ESG criteria, proxy advisor standards

These “private regulations” can be as binding as public law—losing access to Apple’s App Store may matter more than a minor regulatory fine. Standard L-dimension analysis often misses this layer.

Limits of Categorical Separation

The P/L separation, while analytically useful, can obscure important dynamics:

• Regulatory capture: Where industry influence makes Legal effectively Political
• Judicial politics: Where court appointments reflect Political factors
• Legislative activism: Where rapid political change creates legal uncertainty
• International law: Where Political consensus creates Legal obligation

Practitioners should use the P/L distinction as a thinking tool, not rigid category.

Conclusion

The Legal dimension in STEEPLE represents more than a bureaucratic compliance checklist. It embodies a fundamental insight: law operates according to different logics than politics, with different time horizons, actors, and strategic implications.

The historical emergence of the L-dimension—driven by European integration, international marketing complexity, and the professionalization of compliance functions—reflects a real-world recognition that organizations need separate analytical capacity for legal factors.

For foresight practitioners, key implications include:

1. Don’t subsume L under P: Political signals and legal requirements demand different analysis and response
2. Monitor the pipeline: Use the Political-Legal Pipeline model to track issues from debate to codification
3. Scan soft law: Today’s voluntary standard is tomorrow’s mandatory requirement
4. Watch Brussels: The EU remains the primary source of global regulatory innovation
5. Develop Legal Foresight capability: Regulatory uncertainty is increasing; waiting for clarity is itself a strategic choice

In an era where the pacing problem creates growing gaps between technological capability and legal clarity, and where the Brussels Effect exports European regulatory choices globally, the L-dimension has never been more strategically significant. Organizations that treat legal analysis as mere compliance—rather than strategic foresight—will find themselves perpetually surprised by regulatory futures they failed to anticipate.

References

Additional Resources

• CIPD. “PESTLE analysis.” https://www.cipd.org/en/knowledge/factsheets/pestle-analysis-factsheet/
• UK Government Office for Science. “Futures Toolkit.” https://www.gov.uk/government/publications/futures-toolkit-for-policy-makers-and-analysts
• Collingridge, D. (1980). The Social Control of Technology. London: Frances Pinter.