Insights

Are corporate DEI efforts actually retreating?

By Global Gateway Advisors

March 19, 2024

Recent headlines suggest companies have pulled back on their DEI commitments, reflecting a shift from the social justice movement of 2020 to a muted environment after the Supreme Court struck down affirmative action in 2023. The research shows a more complex reality.

  • Businesses are balancing their investments – and how they communicate about these initiatives – to avoid legal issues and unwanted public scrutiny.
  • It’s also important to separate workplace DEI, which centers around building an internal culture of inclusion, from ESG, a set of standards geared toward an investor audience.

As other defining issues, ranging from AI strategy to election year politics, capture companies’ attention, this edition will help communications leaders provide better counsel to their organizations on DEI topics.

1. Affirmative action ruling had immediate impact on corporate DEI

The big picture: Fortune 100 companies are navigating a shift in how diversity, equity and inclusion programs can operate.

  • In June 2023, the Supreme Court ended race-based affirmative action in higher education. Republican attorneys general have raised concerns about DEI initiatives in corporations and warned against making race-based hiring decisions.

  • Companies have since faced complaints and litigation related to their DEI initiatives.

Go deeper: Based on analysis before the SCOTUS decision, legal experts anticipated that a ruling against affirmative action would lead to scrutiny of DEI programs in the workplace.

  • This prediction held true. Companies have traditionally argued that diversity strengthens the workforce, similar to affirmative action in universities. The Supreme Court’s decision weakened the legitimate grounds for these programs, so businesses that have maintained their stance on DEI are now working to avoid drawing legal scrutiny.

What else: A new case before the Supreme Court, Muldrow v. City of St. Louis, is worth monitoring. A female police sergeant alleged that she was reassigned to a less prestigious role because she is a woman.

  • If the court widens its judgment beyond job transfers, development and retention programs specifically for women or people of color may be subject to change.

Why it matters: Companies are examining their DEI programs more closely to ensure they comply with the changing legal landscape. Employers can proactively adapt to this shift and continue building a diverse workforce and an inclusive culture.

2. Align DEI initiatives to measurable outcomes

The big picture: Companies are more clearly aligning DEI commitments to business goals.

  • Mentions of ESG and DEI in shareholder proposals and boardrooms may be down, but a recent Littler study indicates ongoing commitment among most large companies.

  • This is further supported by a Purpose Brand finding that 154 Fortune 500 companies released diversity disclosures in 2023, nearly double the 79 produced in 2022.

  • All eyes will be on the diversity reports published in 2024, as they will likely reflect the broader industry trend of companies “reassessing verbiage and DEI endeavors that could bring legal risk.”

Go deeper: The Littler survey also reveals a potential disconnect between chief diversity officers (CDO) and chief legal officers (CLO) regarding how their perspectives and goals for DEI have diverged in the current climate.

  • While 57% of CDOs say their organization is defining metrics for DEI progress, just 19% of CLOs say the same. This highlights the need for stronger alignment within top leadership regarding DEI goals and measurement.

What else: 91% of C-suite leaders say the Supreme Court ruling has not lessened their DEI prioritization.

  • A survey of organizations for McKinsey’s 2023 Women in the Workplace report showed that 60% of respondents increased DEI staffing and budgets over the past year, and 34% maintained their staffing and budgets. Only 4% reported a decrease in 2024.

  • These trends suggest that the idea of a widespread corporate retreat from DEI is likely overstated.

  • “For the companies that are very well run in this space … perhaps they changed some of their programs, perhaps they tweak some of their efforts, perhaps they changed some things. But many of them are maintaining significant commitments to this business effort,” said Karyn Twaronite, EY’s global vice chair of diversity, equity, and inclusiveness. “This isn’t a ‘let’s do it for three years and not do it anymore’ kind of program.”

Why it matters: Companies with DEI experts in senior leadership are better equipped to navigate the evolving landscape.

  • The top impact measures of DEI programs boost employee engagement and strengthen company culture, leading to greater organizational success and a positive impact on the bottom line.

  • Strong DEI leaders bring deep knowledge and core competencies to do the work, so their organizations are doubling down on it because they deliver results. They can also drive focus on the most critical culture and business metrics.

  • “Impactful work may sometimes occur quietly, but it’s still happening,” Gusto’s Emil Yeargin said at SXSW. “Celebrate daily wins and successes because the work is never done, and measure relentlessly to show impact.”

3. Build a more inclusive culture

Companies have broadened the definition of diversity, equity and inclusion to ensure that employees – regardless of how they identify – feel seen, heard, and valued.

  • They emphasize the importance of fostering a diverse and inclusive workplace where people feel a sense of belonging, which is key to attracting and retaining talent, particularly in a competitive job market.

  • “I think instead of saying this is a program for Black employees, it would be more like, ‘this is a program to increase the equity of promotion rates across the firm, and everybody is included in applying to be part of this program, but will play different roles,’” said Porter Braswell, founder of 2045 Studio.

Go deeper: A report from Expanding Equity, a W.K. Kellogg Foundation program helping companies implement DEI initiatives, found that 94% of companies have zeroed in on retention, implementing at least one inclusion and belonging initiative.

  • Core DEI initiatives, such as parental leave and accessible facilities, and policies like equal pay and anti-harassment remain in place.

What else: Some firms, like Blackstone, are focusing on hiring for socioeconomic diversity and on changing job requirements to find more diverse talent without targeting a specific race or ethnicity.

  • This movement extends to disability inclusion at work: An Accenture report showed companies leading in this area see significant financial advantages, including 1.6 times more revenue, 2.6 times more net income, and 25% higher productivity.

  • “For too long, people with disabilities – individuals who are perfectly qualified and overwhelmingly willing to work – face enormous barriers to being offered a job,” said Ted Kennedy, Jr., co-chair of the Disability Equality Index.

Why it matters: The trend toward inclusion and belonging is likely to continue, ensuring employees from all backgrounds feel valued and supported at work.

4. Considerations for strategic communicators

  • Be authentic to the organization’s core values: Ensure DEI efforts and communication strategies reflect the company’s values – particularly when it comes to an emphasis on inclusion.

  • Reflect on the past + align on the future: Evaluate past public commitments around DEI and assess how the current approach reinforces those commitments. Address any disconnect among key leadership stakeholders to ensure the CEO, CDO, CLO and/or CHRO share a unified understanding and approach to DEI within the company.

  • Set a single strategic approach: Create a DEI communications strategy grounded in data and insights, and embed it across all levels of the organization. Engage affinity groups and managers to ensure everyone feels a part of the strategy.

  • Be prepared: Track current events and prepare a scenario plan to identify vulnerabilities and help the organization mitigate internal or external challenges.

  • Establish clear metrics: Regularly measure and report on progress. Transparently reporting on these metrics builds trust and reinforces the business value of an inclusive workforce.

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