1.3.2. Business Enabling Environment - Overview (2024)

What is the Business Enabling Environment?

The business enabling environment (BEE) includes norms and customs, laws, regulations, policies, international trade agreements and public infrastructure that either facilitate or hinder the movement of a product or service along its value chain. At one end of the spectrum, conventions, treaties, agreements and market standards shape the global business enabling environment. Trade agreements, such as the Lomé Convention or AGOA, can open opportunities for firms; simultaneously, complying with international standards such as GLOBALGAP and USDA’s APHIS program can be expensive for small firms, precluding them from being competitive. The business enabling environment at the national and local level encompasses policies, administrative procedures, enacted regulations and the state of public infrastructure. Analysis of the BEE at these levels may need to be further broken down in terms of firm size since there may be constraints and opportunities distinctly facing micro- and small enterprises (MSEs).

In addition to these more formal factors, social norms, business culture and local expectations can be powerful aspects of the business enabling environment. Understanding these unwritten rules of society is essential if practitioners are to understand why value chain actors behave the way they do, and reasonably predict how they will behave in response to value chain interventions.

The informal rules or regulations found in any business environment do not arise arbitrarily. They have historical roots, and are strongly determined by the social institutions of that community—including gender, race, ethnicity, class and religion.

For more on informal rules and social regulation in the BEE, click here.

Why Does the Business Enabling Environment Matter?

Every day an entrepreneur spends filling out paperwork or in line at a government office is a day not making sales or finding new customers. Burdensome and unpredictable regulation is costly both in terms of the time and money required for compliance as well as in opportunity cost. In many countries, these costs are substantial. In Brazil, for example, not only is the tax rate nearly 70 percent, but the procedures are so complicated that the average amount of time required to prepare, file and pay taxes is estimated to be 325 days.[1]

A growth-oriented small businessperson faces a choice: comply with regulations and incur costs so high that they jeopardize the business’s viability or try to survive in the informal sector without bank credit or enforceable contracts and at constant risk of harassment from authorities. Approximately 60 percent of urban businesses in Africa, 40-60 percent in Asia and 58 percent in Latin America remain outside the formal sector.[2] They are limited in their ability to grow, attract investment and hire more workers. The workers they do employ have no legal protections. Without informal enterprises’ tax contributions, government is limited in its ability to provide services and the tax burden on registered businesses is greater than it should be.

Reform of the BEE can result in substantial benefits for an economy including faster growth, less unemployment, more gains from trade, greater formalization, reduced poverty, less corruption and lower budget deficits.

BEE and the Value Chain Project Cycle

Improving the business environment by lifting constraints and filling gaps in the regulatory and administrative support mechanisms is central to any comprehensive competitiveness strategy for a targeted value chain. Consideration of the enabling environment should inform each stage of a value chain development project.

Value Chain Selection

BEE opportunities for specific value chains to become more competitive or achieve significant impact may influence the selection of value chains targeted for development. Conversely, if specific value chains face BEE constraints that can not be addressed by a project, implementers may decide to select alternative value chains. Click here for special considerations in post-conflict situations.

Value Chain Analysis

An analysis of policy constraints and opportunities, which is integral to value chain analysis, can be used during the development of a competitiveness strategy to identify where and how to compete in target markets. While benchmarking reports and diagnostic tools can facilitate an economy-wide view of business environment constraints or opportunities, most of them do not include sector- or industry-specific indicators; this may limit their utility in identifying value chain-specific constraints. Additionally, by relying solely on broadly-focused reports or diagnostics, program designers may waste time considering reforms that are not relevant to their targeted value chains. Some more specific tools can help focus analysis of the enabling environment:

  • USAID's Competitiveness Impacts of Business Environment Reforms (CIBER) tool aims to engage value chain actors in a participatory assessment process to identify high-priority reforms and develop a plan of action.
  • The Climate, Legal, and Institutional Reform (CLIR) tools offer a data-rich assessment of a country's business environment to help governments and donors gain a comprehensive understanding of the barriers to private-sector growth.
  • International ranking and benchmarking reports are often a good starting point for obtaining a snapshot or overview of a country's business climate.
  • The International Finance Corporation BEE Toolkits provide step-by-step guides to both diagnosing and facilitating business environment reforms.

Design and Implementation

Activities leading to policy reform are often a key component during implementation. Two popular and complementary types of approaches for reforming the business environment are referred to as "top-down"--national-level and/or public sector-driven--and "bottom-up"--local-level and/or private-sector driven. However, it is difficult sometimes to draw a clear line to distinguish a "top-down" approach from a "bottom-up" one. Oftentimes, elements of both types of approaches are combined to form an effective reform strategy. Click here for more on the different approaches to policy reform. Regardless of the approach, the engagement of both public and private sector actors through appropriate dialogue and strategic communications is imperative to the success of any business environment reform initiative.

Monitoring and Evaluation

Monitoring of progress in the area of reform may lead to a reassessment of the choice of value chain should BEE constraints be so binding as to prohibit or severely limit the return on investment. Monitoring and evaluation is complex in any private-sector development project, but BEE reforms present special challenges that should be considered[3]:

  • What is success? Desired outcomes of business environment reform projects vary. For example, the number of administrative procedures required of a firm may be less relevant than the time or cost needed to complete these procedures. In some cases, the time required to complete a procedure may be reduced as a result of a project initiative, but only at the expense of cost. Futher, the results of reforms may affect firms differently based on their size and location.
  • What is the most appropriate timing for evaluation? BEE reform activities often set in motion changes in attitudes and roles in organizations that may not be fully realized until several years after a project ends. An evaluation conducted as a project closes may not capture the full benefits of the activities.
  • Can success or failure reasonably be attributed to the project? External factors affect the results of a program in both positive and negative ways making it difficult to isolate the impact of reforms. These factors include trade reform, fiscal and monetary policy, prices of input factors, improvements to the educational system, civil service reform and political reform.

Care must be taken in selecting indicators. Doing Business[4] indicators are most useful at the beginning of a reform process to select reform priorities and generate interest in undertaking reforms. They are rarely appropriate for monitoring and evaluation. For guidance on conducting monitoring and evaluation, see Monitoring and Evaluation.

What is Successful Reform?

Reform is a political process that encompasses much more than a series if inputs leading to discrete legal outputs. Successful reform incorporates relationships and shapes incentives that drive both business and government behavior. Successful reform builds trust, promotes transparency and ensures that benefits accrue to those taking risk. The most significant policy reform may not be the creation of a new law or policy, but rather changing or improving the implementation of an existing law or policy. Successful policy reform requires changing three things:

  • how laws are implemented
  • the burdens that are placed on businesses and the relationships in which businesses can engage
  • the incentives that drive business decisions

If a reform cannot be expected to change how businesses make decisions, it may be preferable to focus resources elsewhere. Private-sector entities within a value chain can inform the process: they know whether or not a law is important, and whether reform is likely to change how they behave.

Lessons Learned in BEE Reform

There is no standard process for reform, and there can be no “how to” manual. Different reforms involve different stakeholders and different mixes of technical, political and institutional issues. Reform is also shaped by a country’s politics and capacity. Nevertheless there are common insights and lessons that emerge, and these lessons provide something of a checklist for reformers:[5]

  1. Use the wide and growing array of new tools to benchmark and diagnose constraints and identify reform priorities.
  2. Foster competition through trade and product market reforms to create pressure for other investment climate reforms.
  3. Generate and leverage new information on specific policy reforms and proven good practices to expose the costs of the status quo, build support and overcome opposition.
  4. Seize crisis or political change to push through bold reforms. AC
  5. Use pilots and sector-specific interventions as learning and demonstration tools when reforms face great uncertainty or strong opposition.
  6. Leverage and empower supporters to help mitigate opposition using a mix of strategies and techniques, while maintaining dialogue with the private sector and other key stakeholder groups.
  7. Do not wait for long-term public sector reform to create the right incentives and capacity for implementation. Bring in new leadership and skills from the outside, set performance targets and incentives, leverage new information technology solutions, and outsource implementation to the private sector.
  8. Build on dedicated, empowered and competent teams to lead and sustain the reform process while ensuring transparency and accountability.
  9. Monitor progress closely against realistic and agreed upon targets and set up systems early in the process to measure results on the ground.
  10. Pay as much attention to getting the reform process right as to the technical content of reform to achieve desirable and sustainable policies and outcomes.


  1. World Bank, Doing Business 2008
  2. K. Floodman Becker, The Informal Economy: Fact Finding Study, SIDA, 2004
  3. The Monitoring and Evaluation Handbook for Business Environment Reform, by the IFC, GTZ and DFID
  4. World Bank's Doing Business Series
  5. Source: Sunita Kikeri, Thomas Kenyon, Vincent Palmade, ‘’Reforming the Investment Climate: Lessons for Practitioners’’, 2006

Related Resources

  • Breaking the Rules that Bind pdf

    pdf 1.02 MB

  • Reforming Business Registration Regulatory Procedures at the National Level - A Reform Toolkit for Project Teams pdf

    pdf 1.27 MB

1.3.2. Business Enabling Environment - Overview (2024)


What is a business enabling environment? ›

Business Enabling Environment (BEE)*

The BEE Concept Note establishes the objectives, scope, and approach of the project, including a general description of the indicators covered and its motivation, data collection approaches, roll out for the piloting stage, geographical coverage and general timeline.

How do you create an enabling business environment? ›

Examples include simplifying business registration and licensing; improving tax policies; enabling better access to finance; improving land titles; enhancing public-private dialogue; and developing appropriate quality standards.

What is an enabling environment PDF? ›

The business enabling environment is best defined as all of the government-influenced macro-level factors that affect enterprises throughout the value chain. Improving the business enabling environment can, therefore, benefit many organizations within it.

What is the enabling environment? ›

An enabling environment is a rich and varied space where risks are minimised and well managed, and children are protected from harm and abuse. To help ensure your environment is enabling, follow this checklist: Create an environment that is warm, welcoming and nurturing and facilitates a sense of belonging.

What are the 3 enabling environments? ›

The Emotional Environment The Indoor Environment The Outdoor Environment.

What are the 5 elements of the business environment? ›

The elements of a business environment can be mentioned as follows:
  • Political.
  • Economic.
  • Social.
  • Technological.
  • Legal.
  • Environmental.

What are the key elements for an enabling environment? ›

Enabling environments include both formal and informal elements: Formal elements include public policies, governance structures, regulatory frameworks, investment programs, and other formal aspects of the policy environment.

What is importance of enabling environment? ›

Enabling environments encourage babies and young children to play because they feel relaxed, comfortable and 'at home' in them. When children feel emotionally safe and secure they are able to explore and find out about the place they are in and the things they can see, touch, manoeuvre or manipulate.

What is a business enabler explain with an example? ›

An enabler is a leader or manager who supports their team and helps them accomplish their goals in a positive context. They don't hold their teams back but clear the way to do what they do best. The best leaders give their team an understanding of why their work is essential.

What are the three types of environment? ›

The three types of environment are: Internal environment. External macro environment. External micro environment.

What is an enabling theory? ›

The concept of drawing upon theory to illustrate evidence in practice and vice versa enables practitioners to connect with how children acquire language and enhance their own good practice.

What are the 3 characteristics of in the moment planning? ›

It's often broken down into three stages:
  • The Child's Spark – This is when the child first shows an interest in something. ...
  • The Teachable Moment – The teacher will notice this and approach the child. ...
  • The Documentation – At a later date, you can document the observation.

What is an enabling environment for innovation? ›

An innovation-enabling organisation is one where employees are empowered to innovate, where there is investment in relevant skills and abilities, individually and collectively, and where the prevailing attitudes towards exploring and experimenting are positive and tolerant.

What is another word for enabling environment? ›

in the enabling environment > synonyms

»create a favourable environment exp. »create an enabling environment exp. »create an environment conducive exp. »create favourable conditions exp.

What are 5 components of a good early learning environment? ›

This document identifies and articulates the characteristics of five Key Elements that are fundamental to achieving high-quality experiences and strong outcomes for preschool children: the learning environment, daily routine, adult-child relationships, teaching practices, and family engagement.

What are the 4 types of environments? ›

The atmosphere or air, lithosphere, or rocks and soil, hydrosphere, or water, and the biological component of the environment, or biosphere, are the four basic components of the environment.

What are the 4 categories of environment factors? ›

Environmental factors in business are the conditions that exist in a business environment. The major environmental factors in business are technological factors, economic factors, social factors, political factors and cultural factors.

What are the 4 basic component of the environment? ›

The basic components of the environment are atmosphere or the air, lithosphere or the rocks and soil, hydrosphere or the water, and the living component of the environment or the biosphere.

What are the 7 key environments of business? ›

This external business environment is composed of numerous outside organizations and forces that we can group into seven key subenvironments, as Exhibit 1.4 illustrates: economic, political and legal, demographic, social, competitive, global, and technological.

What are the 6 factors that influence the business environment? ›

In this article, we will define the general environment in business and explore the six forces affecting a business's operations using the PESTEL analysis tool.
What are general environment forces?
  • Political factors. ...
  • Economic conditions. ...
  • Sociocultural factors. ...
  • Technology. ...
  • Environment. ...
  • Legal.
May 3, 2021

What are the 10 types of business environment? ›

The main types of business environments are as follows:
  • Micro Environment. A microenvironment can be described as a collection of elements that affect the functioning of the business. ...
  • Macro Environment. ...
  • Market Environment. ...
  • Natural Environment. ...
  • External and Internal Forces. ...
  • Uncertainty. ...
  • Complexity. ...
  • Relativity.
Sep 28, 2022

What are the 4 elements for creating a positive learning environment? ›

Four Elements for Creating a Positive Learning Environment
  • Safety. Before students can succeed academically, they must feel safe, both physically and mentally. ...
  • Engagement. ...
  • Connectedness. ...
  • Support.
Nov 7, 2016

What is enabling in entrepreneurship? ›

Whilst 'entrepreneur enabling' is about working with and supporting individuals, entrepreneurship enablers are those people who make it (more) possible for entrepreneurs to emerge and grow in the first place. They affect the infrastructure and the culture that others demonstrate is important in regeneration.

How to work collaboratively to provide enabling environments? ›

Be resourced with interesting open-ended toys and resources to look at, touch and explore. Support and enhance the play opportunities of all children, boys as well as girls. Have resources stored at a height where children can see and access them. Make good use of mirrors to create interesting environments to explore.

What is the purpose of helping the environment? ›

Benefits like improved water quality and air quality, increases in biodiversity and habitat protection, and reductions in greenhouse gases (GHG), are all inherent in a strategy that protects and preserves land.

Which are the six enablers of business processes? ›

Let's briefly explore each enabler.
  • Leadership & Management. I often hear it said that leaders should support or 'buy-in' to the change initiative. ...
  • Organisational Culture. ...
  • Organisational Structure. ...
  • People & Engagement. ...
  • Governance & Funding. ...
  • Ways of Working. ...
  • Summary.

What are the two types of enablers? ›

Type of Enablers

Architectural enablers – These are created to build the Architectural Runway, which allows smoother and faster development. Infrastructure enablers – These are created to build, enhance, and automate the development, testing, and deployment environments.

What are three characteristics of an enabler? ›

Signs or characteristics of an enabler
  • Ignoring or tolerating problematic behavior. ...
  • Providing financial assistance. ...
  • Covering for them or making excuses. ...
  • Taking on more than your share of responsibilities. ...
  • Avoiding the issue. ...
  • Brushing things off. ...
  • Denying the problem. ...
  • Sacrificing or struggling to recognize your own needs.
Jun 27, 2019

What are the 4 different environments that affect business? ›

Here are the nine types of external environment factors that affect businesses:
  • Technological factors. ...
  • Economic factors. ...
  • Political and legal factors. ...
  • Demographic factors. ...
  • Social factors. ...
  • Competitive factors. ...
  • Global factors. ...
  • Ethical factors.
Jul 13, 2021

What is an example of a business environment? ›

Some of the examples of a business environment are values, culture, competition, market segmentation, demographics, business cycle, and economic security.

What are the 4 environment categories in which a business mostly operates? ›

The environment includes factors outside the firm which can lead to opportunities for or threats to the firm. Although there are many factors, the most important of the sectors are socio-economic, technological, supplier, competitors, and government.

What are the 2 types of business environment? ›

The two types of business environment are:
  • Internal business environment.
  • External business environment.

What are the 3 types of business environment? ›

The three types of business environment are:
  • Economic environment.
  • Social environment.
  • Political environment.

What are the three components of business environment? ›

The 5 components of a business environment are:
  • Economical environment.
  • Political environment.
  • Social environment.
  • Technological environment.
  • Legal environment.

Why is business environment important? ›

The environment provides various inputs (resources) like finance, machines, raw materials, power and water, labour etc. The business enterprise provides outputs such as goods and services to the customers, payment of taxes to the government, interest/dividend to investors and so on.

What are the 6 environments of business? ›

The 6 business environments can be enumerated as follows:
  • Economical environment.
  • Political environment.
  • Technological environment.
  • Legal environment.
  • Social environment.
  • Global environment.

What is business environment and explain its types? ›

Definition of Business Environment is sum or collection of all internal and external factors such as employees, customers needs and expectations, supply and demand, management, clients, suppliers, owners, activities by government, innovation in technology, social trends, market trends, economic changes, etc.

What are the characteristics of business environment? ›

Meaning of Business Environment

According to them: “The environment includes factors outside the firm which can lead to opportunities for or threats to the firm. Although, there are many factors, the most important of the factors are socioeconomic, technological, suppliers, competitors, and government.”

What are the models of business environment? ›

The Business Model Environment is organised into four areas: Market Forces, Key Trends, Industry Forces and Macro-Economic Trends. These areas surround the Business Model Canvas as they influence the kind of business model that will be designed.

Top Articles
Latest Posts
Article information

Author: Zonia Mosciski DO

Last Updated:

Views: 5244

Rating: 4 / 5 (71 voted)

Reviews: 94% of readers found this page helpful

Author information

Name: Zonia Mosciski DO

Birthday: 1996-05-16

Address: Suite 228 919 Deana Ford, Lake Meridithberg, NE 60017-4257

Phone: +2613987384138

Job: Chief Retail Officer

Hobby: Tai chi, Dowsing, Poi, Letterboxing, Watching movies, Video gaming, Singing

Introduction: My name is Zonia Mosciski DO, I am a enchanting, joyous, lovely, successful, hilarious, tender, outstanding person who loves writing and wants to share my knowledge and understanding with you.