Some of the biggest companies and financial institutions in the world are winding down their diversity, equity, and inclusion (DEI) programs. But why? And why now?

On his first day in office, President Trump fulfilled an election promise by signing an executive order putting an end to DEI programmes across the federal government.

Soon after, Meta – the parent company to Facebook, Instagram and WhatsApp – decided to end its DEI program and dismantle its DEI team.

And they weren’t alone. Over recent months, Google, Amazon, Walmart, McDonalds, Ford and others have all scaled back their diversity initiatives and put an end to many of their DEI targets. Many banks and financial institutions have followed suit. JPMorgan Chase, for example, has minimized public mentions of DEI in its annual filings this year, and Goldman Sachs has ended its board diversity rule.

People, workplaces, society

So, is that the end for DEI? What’s behind these changes? And how will their demise affect people, workplaces, and society?

Arguments for and against the effectiveness and even validity of corporate DEI programs have swirled around for years – despite the evidence that more diverse workforces result in increased commercial success. Studies by McKinsey and BCG report that companies with more diverse management teams have higher revenues of between 19% and 36%. And then there are the obvious benefits to social justice and humanity as a whole.

Despite these advantages, opposition to DEI is never out of the headlines. But even when they expressed doubt, most companies and banks obediently continued to roll out initiatives and targets to support it.

In 2023, the US Supreme Court ruled to outlaw affirmative action in college admissions, meaning that race could no longer be considered in the application process. This in turn prompted a widespread review of DEI policies by companies seeking to mitigate any potential legal issues that might follow the new precedent.

An Atlanta-based VC firm had its grant funding blocked for being “discriminatory” to non-black people in violation of the Civil Rights Act of 1866.

Since the ruling we’ve also witnessed a flurry of legal cases citing “reverse discrimination”, anti-affirmative action, and anti-DEI motives.

For example, in late 2023 the Fearless Fund, an Atlanta-based VC firm, had its grant funding blocked for being “discriminatory” to non-black people in violation of the Civil Rights Act of 1866. Interestingly the case was brought by the same advocacy activist – Edward Blum, founder of American Alliance for Equal Rights (AAER) – that successfully opposed Harvard in the recent Supreme Court ruling known as the Students For Fair Admissions (SFFA) case, mentioned earlier.

Others have followed, along with threatening letters to companies and federal agencies attempting to use the SFFA ruling to challenge DEI initiatives – see one such example sent to Costco.

Impacts and implications

Actions have consequences and these activities are indeed having an impact. According to data analysis firm Crunchbase, funding to Black-founded start-ups dropped by 71% in 2023, compared to a the overall decline in startup funding of 37%. Black-founded non-profits also report lower levels of racial equity funding since 2020 in what has been called a right-wing backlash against racial equity initiatives.

So far so depressing. And with a predominantly conservative presence in the Supreme Court, we might well expect to see more support for anti-DEI cases in the near future.

But perhaps it’s not all bad news. Evidence also suggests that despite these challenges, companies remain committed to their DEI objectives and are continuing to maintain their policies and provide training and other resources to drive diversity in their workplaces. Costco, for example, rejected demands – sent in a letter from 19 Republican attorneys general – to drop its DEI programme, reaffirming a commitment to an inclusive and respectful workplace.

A 2024 survey of 300+ C-suite executives from across the US also found that 91% believe that the SFFA court decision has not lessened their prioritization of DEI, while 57% reported increasing their DEI efforts over the past year. This reflects the wider view – revealed in the Harris Poll for the Black Economic Alliance Foundation – that 81% of American adults agree that corporate America should reflect the diversity of the American population.

DEI in the future

Clearly the DEI landscape is shifting and at first glance it doesn’t look great. Fearing legal implications set by conservative anti-green/liberal/woke agendas and precedents, many are indeed now rolling back their DEI initiatives. This could hinder progress in addressing systemic inequalities. Whilst it’s true these programs may not have been perfect, their absence means there could now be fewer mechanisms to prevent and address discrimination, ultimately slowing social progress and inclusivity.

On the other hand, DEI has and continues to be impactful and for companies this is surely the main consideration. Perhaps then DEI will go the same way as ESG – with some terms reframed to avoid legal repercussions and anti-woke criticisms but the underlying concepts essentially staying the same.

So just as “ESG” and “sustainability” may become the more specific, technical and commercial sounding “energy transition” or “low carbon growth”, so too DEI may shift to “talent” or “leadership and culture”. Time will tell but this could at least for now be an easy fix that enables companies to continue their efforts to create a more equal society, without excessive criticism.

DEI is dead, long live DEI 2.0.