Amid challenges to DEI, a better opportunity may emerge

Over the past few years, politicians, agitators, and think tanks dedicated to dismantling diversity, equity, and inclusion (DEI) may not have fully realized the full consequences of their actions.

They have employed a variety of strategies in the public and private sectors, including White House executive orders, lawsuits or threats of lawsuits, shareholder proposals, and sustained pressure on social media. They have achieved some high-profile victories, most notably theSupreme Court ruling on affirmative action, and the decision by several companies (including retailers and brands) toterminate or scale backtheir DEI programs.

These successful challenges have inevitably forced companies to scrutinize their DEI practices. But they also present an opportunity to strengthen the goals and execution of DEI—something David Glasgow, executive director of the Meltzer Center for Diversity, Inclusion, and Belonging at New York University, sees as a silver lining.

In fact, these victories are far from comprehensive. Because diversity, equity, and inclusion aregood for businessfor many reasons, most companies have not abandoned DEI. Entering 2025,Target、Nike , and Costco have at least defended some of their policies (in Costco's case,vigorously). As the Heritage Foundation, a leading opponent of DEI, noted in November,most Fortune 500 companies continue to publicly commit to DEI。

"Now is the time for companies to refine and strengthen their inclusion efforts to reduce short-term risk—because the risk is real, we know that—and to do so in a way that is sustainable over the long term," said Adrienne Pulido, vice president of inclusive insights at Kantar. "So, it requires looking at it from both angles, clarifying what inclusion means for their business."

What DEI is and is not

DEI is accused of being discriminatory and unfair, but these systems are designed to create businesses that are neither discriminatory nor unfair. That is, employees in a business have diverse backgrounds and perspectives (diversity); hiring, promotion, and other actions are carried out fairly (equity); and the culture is comfortable and attractive to all employees (inclusion).

"Interpreting what DEI and inclusion mean is part of the moment we are in, and part of the conversation companies need to have about their strategy," Pulido said via video conference. "What does DEI mean for the business itself? What does it mean for the current business and the future business? Because the demographics of the country are changing, and our research shows that inclusion as a concept, as an idea, is very popular among Americans of all backgrounds."

For most companies, DEI goals are more important than ever because the markets for their products and services are more diverse than they were a decade ago or earlier, said Effenus Henderson, who has worked in recruiting, staffing, and succession planning in the United States and overseas since the 1970s.

"This attack is amplified through social media, technology, and psychometrics, where emotions are stirred up and reinforced," he said by phone. "But at the root of all this, DEI is not about creating discriminatory systems, nor is it about quotas, nor is it about focusing on one aspect to the exclusion of others. I don't think organizations have really done that. What they have been doing is truly trying to broaden participation, because we are seeing increasing demographic change."

Henderson believes that developing DEI strategies that align with and advance business strategy requires leadership involvement. However, too often these strategies are left to the human resources department, which can lead to companies adopting DEI programs that are ineffective or even untenable.

"The companies that are able to navigate this situation are usually those whose leadership has taken the time to discuss this topic," he said. "It's not just about responding to the George Floyd incident or civil rights laws or lawsuits. It's, 'How do we integrate this into our DNA as an organization?' If your organization is more focused on surface-level efforts, then they won't truly understand how it helps shape business strategy and policy."

DEI should be treated with the same importance as other strategic priorities, said Tim Heneveld, director of Pergolux North America. At a time when DEI is under scrutiny, it is a good opportunity to reassess whether recruitment, work environment, leadership, and operational strategies align with broader goals.

"This means setting measurable goals, using data to track impact, and holding leadership accountable," Heneveld said via email. "Some organizations feel pressure to scale back DEI, but I think doing so is short-sighted. Instead, companies should refine their DEI strategies to align with long-term business goals, rather than reacting to the media or any other external factors. I have personally experienced that the workplace can attract top talent, strengthen teams, and improve retention rates."

In some cases, companies will continue their DEI efforts but change the names of their programs or employee titles, experts say.

Henderson believes that developing DEI programs and training is always a process of continuous improvement, because business, markets, and demographics are all evolving. For many companies, this may mean avoiding the use of the three letters or the words "diversity, equity, and inclusion." But it also requires careful thought, he said.

"Is it still appropriate to continue to refer to it under these banners? If I consider renaming it, am I doing so to enhance our appeal to the customers and employees we serve? Or are we taking a reactive, defensive measure in response to current hot-button issues?" he said. "Clarify your goals, alignment with strategy, and then decide whether your framework today is suitable for tomorrow and the day after. In some companies, it may mean one thing, and in others, it may mean something else."

Legal issues

The list oflawsuits against DEI programstracked by the Meltzer Center is long and growing.

Glasgow says most of these lawsuits invoke civil rights laws designed to end or prevent unfair hiring practices or contracts. This often includes Title VII of the Civil Rights Act (which prohibits discrimination based on race, color, religion, sex, and national origin), Section 1981 of the U.S. Code (which prohibits discrimination in contracts), and the Equal Protection Clause of the U.S. Constitution. The Meltzer Center advises companies to avoid DEI practices that give preferential treatment to members of specific groups and involve tangible benefits.

Assessing whether a company's DEI programs violate the latest interpretations of these regulations requires hiring a lawyer or other compliance expert.

"This has become a booming area of legal practice," Glasgow said.

Any business strategy should always be based on risk mitigation, and this is just another aspect that companies need to examine, Henderson said. Companies may find that certain aspects of their DEI programs need to change to avoid risk.

Other companies may find that their programs are compliant. In a proxy statement urging shareholders to vote against proposals that could weaken its DEI programs, Costco's board of directors explicitly stated that the retailer regularly evaluates its "practices in light of legal requirements, including evolving Supreme Court rulings."

In describing how Costco complies with the law and does not discriminate in hiring, promotion, and other practices, the board also listed a range of protected identities. This serves as a reminder that while civil rights statutes are being used to overturn DEI practices, they do prohibit discrimination on many grounds. Additionally, Henderson said, any company operating overseas encounters anti-discrimination laws that have not been as disrupted by political activism as those in the United States.

"If you look at Canada, Europe, Asia, and South America, there are regulations and laws that support and value diversity," he said. "So, abandoning DEI could actually harm your business strategy in other parts of the world. It's not a simple answer; it depends on who you are."

Although DEI programs may seem to be rapidly being eliminated to avoid controversy, Glasgow and others say that most programs are simply under review.

"I think this is prompting companies to reflect more deeply, not just on whether what we are doing is strictly legal or illegal, but also on what is working and what is not," Glasgow said. "Can we do this work more effectively to truly help us achieve our business goals, or help us create the culture we want? Are there things that have low impact or even negative impact that we should abandon, even if not for legal reasons? I think the moment we are in right now could be a beneficial reset moment for the field."