Trump amps up pressure on companies to roll back DEI

Nearly five years after major companies declared their commitment to diversity, equity and inclusion following the police killing of George Floyd, some are publicly pulling away from those commitments amid intense pressure from the political right, including President Trump.

In the past year, iconic brands including McDonald’s, Meta, Walmart, Harley-Davidson, John Deere and Lowe's have rolled back diversity, equity and inclusion (DEI) initiatives — a broad term that refers to programs, policies, personnel and practices intended to create a more inclusive, representative workplace.

“The anti-DEI movement has done an incredible job vilifying the acronym and defining DEI as the hiring of unqualified candidates or the unfair distribution of funding. This is a very narrow view of how DEI actually shows up in the private sector,” said Elle Arlook, head of equity and justice at the advisory and advocacy firm APCO.

But critics of DEI, many of whom have been working to topple these programs for years, call it an ineffective talking point at best and an affront to equal opportunity and reverse racism at worst.

"Trump’s victory over Kamala Harris on November 5 sealed DEI’s fate. Corporate America, including companies such as Walmart, and Meta, interpreted the event as an incentive to change, voluntarily terminating their DEI programs before Trump took office," wrote conservative activist Chris Rufo, who has long written against DEI and worked with public officials to snuff out DEI initiatives, on his Substack last week.

Trump took a sledgehammer to DEI initiatives in the federal government on his first day in office, doubling down on criticisms that they are divisive, discriminatory and anti-American. On Monday, he also did away with DEI programs within the Department of Defense and Department of Homeland Security, which houses the U.S. Coast Guard.

“My administration has taken action to abolish all discriminatory diversity, equity and inclusion nonsense — and these are policies that were absolute nonsense — throughout the government and the private sector,” Trump said during a remote address Thursday to executives at the World Economic Forum in Davos, Switzerland.

The president can’t actually compel private companies to curtail their DEI efforts via executive order. But Trump can amp up the partisan political pressure, and some companies have cited those political shifts when scrapping DEI programs.

On his first day in office, Trump signed an executive order directing the Office of Management and Budget to terminate all federal DEI programs, which he called “immense public waste and shameful discrimination.” He placed federal employees working on DEI on paid leave and ordered the takedown of DEI-related websites and social media pages.

He later revoked executive actions on discrimination dating back decades, including a 1965 order barring federal contractors from discriminating based on race, color, religion, sex, sexual orientation, gender identity or national origin.

“The president was quite clear during the campaign about his opposition to DEI policies, so no one who has been paying attention should be surprised by the contents of the [executive order],” said Loren Monroe, a principal at the prominent lobbying firm BGR Group.

But Arlook said most of the companies she speaks with "are not making significant shifts to their DEI work beyond de-risking elements that could become litigious."

Even before Trump took office, anti-DEI advocates were gaining ground. Conservative activists and state attorneys general have for years hammered DEI-conscious corporations, law firms and federal officials on social media and in the courts.

One high-profile win, which Trump appeared to allude to during his Davos speech, was a 2023 Supreme Court decision that struck down affirmative action in college admissions.

The movement also exploded into the cultural consciousness when musician Kid Rock launched a Bud Light boycott, which reportedly cost the company $1 billion in lost sales that year, in response to its partnership with influencer Dylan Mulvaney, a transgender woman.

Monroe said he has been helping clients navigate DEI challenges from state attorneys general for the past two years, noting “what starts in the states almost always ends up in Washington.”

“This complex issue will not go away by changing a business title or the language on an office door. It’s a matter requiring a nimble approach by executives combining compliance, public messaging, employee relations and advocacy,” Monroe said.

Texas Attorney General Ken Paxton (R) and nine state attorneys general put financial institutions on notice last week, warning they could face legal consequences for any DEI and environmental, social and governance (ESG) activities "that prioritize politics over consumers and investors."

“Banks and financial institutions are finally starting to realize that the ESG and DEI policies pushed by radical activist groups are bad for consumers and potentially violate the law,” Paxton said in a statement.

“Unlawful race- and sex-based quotas and so-called ‘green energy’ schemes will not be allowed to stand and I will continue to urge these organizations to uphold the legal obligations they owe to consumers and investors. Any institution found to be violating the law will be held accountable.”

ESG, shorthand for a type of investing that prioritizes environmental and social issues, has also been a prime target for conservatives. Republicans on the House Judiciary Committee this summer, for example, accused major investment firms of "colluding” with climate groups.

In 2023, Paxton launched a probe into major U.S. banks, including Wells Fargo, Bank of America, JPMorgan Chase and Morgan Stanley, participating in the Net-Zero Banking Alliance, a coalition of banks targeting net-zero emissions through lending and investing established by the United Nations in 2021. Ahead of Trump's inauguration, several of those banks withdrew from the alliance, prompting Paxton to drop his investigations and declare victory.

ESG investment has exploded in recent years from $5 billion in "sustainable funds" in 2018 to $50 billion in 2020 and $70 billion in 2021, according to a 2022 analysis from the consulting giant McKinsey. The Harvard Law School Forum on Corporate Governance saw trends starting to reverse, however, with outflows topping $13 billion in the first half of 2024 compared to $9 billion in 2023.

McKinsey also estimated in 2023 that companies spent $7.5 billion on DEI-related efforts such as employee resource groups in 2020, and that total spending would double to $15.4 billion by 2026. That same year, however, companies started to pull back from their DEI commitments, citing the politicization of the term and economic uncertainties amid soaring inflation and recession fears.

"Many companies are redirecting resources toward technology, automation, and operational efficiencies. While these investments are critical in some areas, the rhetoric often centers on how technology can replace human workers, with predictions of widespread job losses," said Angela Jackson, senior adviser to the Harvard Project on Workforce and founder of the consulting firm Future Forward Strategies.

"This mindset is the complete opposite of inclusion — it devalues human contributions and ignores the vital role that employees play in driving innovation and organizational resilience."

Jackson writes in her forthcoming book, "The Win-Win Workplace: How Thriving Employees Drive Bottom-Line Success," that companies with more inclusive policies and practice have "measurable business outcomes," including a decrease in employee turnover and higher revenue growth compared to their competitors.

Overall, however, American workers’ opinions on the role of DEI have dropped. While a majority still says focusing on DEI at work is “a good thing,” a growing share views it as a “bad thing,” according to recent polling by the Pew Research Center.

George Carrillo, CEO of the Hispanic Construction Council, said that's in part because "disparities persisted."

"When DEI initiatives were first introduced, they aimed to give diverse groups more visibility, on paper, at least. However, for many, especially Hispanic and undocumented workers who form the backbone of industries like construction, that visibility didn’t lead to real change," said Carrillo.

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