Companies backtracking on DEI: the facts and the future

Companies backtracking on DEI has been a major corporate story in the last two years; let’s get the facts and what they mean for corporate governance.

DEI (diversity, equity and inclusion) has been a corporate buzzword for years. In the 2020s, the topic has taken on a newfound importance in the eyes of many corporate stakeholders. 

And now, companies that previously voiced support for it are going back on their pledges.

Tractor Supply—a Tennessee-based company specialising in rural lifestyle products—announced in June 2024 that it would eliminate all of its DEI-related roles, stop regularly reporting to the LGBTQ+ advocacy group the Human Rights Campaign, and stop sponsoring what it referred to as “non-business” initiatives such as pride festivals and voting campaigns. 

Going forward, the company said any continuing responsibilities in these areas will shift to the internal support network.

No, it’s part of a broader trend that has the following characteristics:

• Companies are backtracking on – or at least watering down – their DEI initiatives. 
• The moves are in response to a solid conservative backlash against such policies.
• The phenomenon is primarily restricted to the US, where DEI—like ESG—has become ensnared in the country’s extremely polarised politics.

Largely, yes. But you’re probably familiar with the old saying, “when America sneezes, the world catches a cold.”

American business and politics have a global outreach, and trends we see in the US one year have every chance of gaining a foothold in other countries the next. It’s typical and expected.

As soon as DEI got a foothold in America – especially in the wake of the murder of George Floyd – criticism persisted. However, the real public blow to DEI came in 2023, when the US Supreme Court ruled that universities were not allowed to consider race in their admissions process. This had the following effects:

• It struck at the heart of many university DEI programs and rendered them inoperable. 
• It emboldened critics of DEI to take a harsher stance in other arenas. 
• It motivated many big companies to rethink their DEI strategies because, while the Supreme Court decision didn’t affect them, it was obvious that their policies would receive more attention.

No, far from it. Some major companies have reaffirmed their support for DEI despite the debate surrounding it. 

Take JPMorgan Chase, for example. In April, its CEO stated that the company remained committed to DEI. 

Such policies “make us a more inclusive company and lead to more innovation, smarter decisions and better financial results for us and for the economy overall”, he said. 

Ultimately, DEI has a lot in common with ESG. Both concepts receive a lot of criticism from fiscal/social conservatives. However, both are still so engrained in modern corporate strategies that any backlash short of universal rejection just won’t get rid of it entirely.

We should always distinguish between loud opinions and prevalent opinions. The anti-DEI brigade is loud, but their efforts don’t resonate with views on the ground. 

For example, a recent survey from Bentley University found that 84% (over four in five Americans) think their company should promote DEI. Even among older generations like Millennials and Generation X, that figure stands at 71%. 

Meanwhile, data from Deloitte reveals that both Gen Z and Millennials will choose potential employers based on their commitment to DEI and other societal and environmental efforts. 

The companies that have changed their wording around DEI or distanced themselves from the concept mainly do so because of stakeholder pushback. 

Changing strategy in response to stakeholder wishes is certainly part of the corporate governance handbook so that the moves can be understood from a strategic perspective. 

That is, of course, assuming that corporate leaders in these companies have considered the broader and long-term implications and are convinced the move is in the company’s best future interests. 

Therein lies the real challenge of approaching DEI in a country so polarised by loud opinions: finding the balance between pleasing vocal critics while not jeopardising the company’s long-term fortunes and reputation. 

As with ESG, some companies are simply changing their wording around DEI to avoid mentioning the “trigger” terms while remaining committed on principle. This is a known and widespread tactic, which might attract criticism in itself, but the important thing is that it may help some companies achieve that balance.