What’s Next for DEI?

Progress on diversity, equity and inclusion in the United States has taken a hit since the summer Supreme Court ruling, say DEI experts and advocates who also observe the country was already backsliding on racial equity progress.

But even amid a backslide, advocates are optimistic that the current wave of backlash has not upended all progress.

“We’re going through a correction, not a catastrophe,” said veteran DEI expert and consultant Janet Stovall, the global head of DEI at NeuroLeadership Institute.

In the wake of George Floyd’s killing, companies rolled out $340 billion worth of commitments to improve racial equity between May 2020 and October 2022, according to data from the McKinsey Institute for Black Economic Mobility.

“When there’s a push forward, there’s always a backlash,” Stovall said. “The reality is, in an inequitable world, equity itself is a disruption. And people don’t like disruption and they push back against it.”

This push back has taken form as companies have been re-examining, restructuring, or quietly shutting down DEI initiatives, funding and positions created to specifically address diversity within their ranks.

A Growing Fear of Litigation

Even though the Supreme Court ruling affected only higher education institutions, fear has spread among the corporate world that DEI initiatives will come under attack.

Some already have. A slew of litigation has been brought against companies, including two with programs focused on supporting Black entrepreneurs. Companies including Kellog’s, Nordstrom, and IBM have had complaints lodged against them by America First Legal, a nonprofit backed by former Donald Trump Adviser Stephen Miller.

A number of lawsuits have been filed by a group founded by conservative activist Edward Blum, the American Alliance for Equal Rights (AAER). Blum’s firm was behind the cases that ultimately led to the Supreme Court’s striking down affirmative action, the Washington Post first reported.

Shortly after the Supreme Court ruling in July 2023 that ruled colleges can’t explicitly consider applicants’ race in admissions, roughly a dozen Republican attorneys general sent a letter to Fortune 100 companies, threatening “serious legal consequences” for companies that rely on race-based employment practices.

By law, private employers are not allowed to make race-based hiring decisions under the Civil Rights Act of 1964, and companies cannot set aside a portion of roles for minorities. But decades of legal precedent have allowed companies to take race into consideration, especially when correcting a documented imbalance in equality.

But firms remain afraid. In mid-December, Reuters reported that at least six major US firms had modified policies designed to boost racial and ethnic representation that conservative groups had threatened to sue. Among the companies are JP Morgan Chase, BlackRock, and American Airlines.

“DEI has now been stigmatized,” said Dionna Sallis, DEI director at Ferguson Partners.

DEI in Corporate Real Estate

In the corporate real estate world, an annual survey from global talent management boutique Ferguson Partners found roughly an 8% drop between 2022 and 2023 in the number of respondents who reported their company has a formal DEI committee for employees to participate in voluntarily.

“Commercial real estate is one of the sectors that is a little bit behind the curve when it comes to progressive or more mature efforts pertaining to diversity, equity and inclusion,” Sallis said.

Ferguson Partners’ survey showed that in companies with more than 600 workers, roughly 19% of companies had one or more fully dedicated DEI employee, where no firms under 150 employees had such a person on staff.

Within the sector, most DEI programs target race, ethnicity, and nationality with a large number of programs addressing directly gender and gender identity as well as sexual orientation.

“Historically, commercial real estate has been predominantly male and lacking in racial diversity and minority groups, including African Americans and Hispanics,” said Leann Mester, the director of corporate marketing & communications and DEI council chair for the Physicians Realty Trust. The Wisconsin-headquartered real estate fund was recognized in 2022 with an award from the CRE Insight Journal for their work in the DEI space.

Rebranding DEI

For firms who remain committed to DEI, there’s a way to do the work. “In a way [DEI] is rebranding,” Sallis said, adding that she’s now seeing firms focus more on inclusivity or overall culture, but the efforts have remained largely the same.

“While the Supreme Court’s affirmative action ruling generated discussions and an in-depth review of our DEI program, our DEI strategies remain steadfast,” Mester said. “There is a growing awareness of the benefits of diversity in decision-making and business performance, as well as a determination to address DEI challenges proactively.”

The Ferguson Partners survey found that the vast majority said DEI was a higher priority or the same level of importance as it was one year ago. Of the nearly 240 surveyed companies, 56.4% have formal DEI programs in place, and 39.4% do not have formal programs but have initiatives and policies in place. Just 4.2% said they have no DEI program.

“Focusing resources on DEI-related activities offers our business strategic advantages and financial benefits,” Mester said. “A diverse workforce brings diverse perspectives, fostering innovative decision-making and creative problem-solving. When it comes to the financial bottom line, engaged and motivated employees, facilitated by DEI, enhance belonging, reduce turnover, and minimize recruitment costs.”

McKinsey analysis finds that companies ranked among the highest for ethnic diversity show an average 27% financial advantage over other, less diverse firms. For women’s inclusion, the figures are similar; firms where representation of women exceeds 30% routinely financially outperform those with 30% or fewer.

“In the communities we serve, businesses with diverse teams better understand and connect with a broad client base, which, in turn, drives long-term growth,” Mester said about her team.

Long-term Implications

The Supreme Court decision has produced knock-on effects throughout the corporate world, and those changes will be felt for years to come. For companies that do prioritize diversity, hiring from diverse talent pools may be harder. A Harvard Business Review study found that after universities, including UCLA and University of Michigan overrode their own affirmative action programs, Black undergraduate employment declined, culminating in a less diverse talent pool for employers.

Within the current environment where fear of litigation is driving changes to DEI policies within firms, NeuroLeadership’s Stovall said she’s seen a number of firms that she advises are not backing down from their DEI programs.

They’re not looking at these new challenges as an absolute roadblock, but something else that must be overcome.

“There are many companies that are saying: ‘OK, this is a hurdle. It’s going to mess with the pipeline, but it doesn’t have to affect what we do. If anything we’re going to double down,’” Stovall said.

DEI Legal Advice

For companies reevaluating their DEI practices, Stovall offers four pieces of advice.

Observe what the law says and what it doesn’t say. Omit policy aspects that are an issue, and where diversity policies have been reviewed and approved by a company’s legal team, overlook any undue scrutiny.

“Don’t change things out of fear,” she said. Firms also need to objectify business outcomes and tie diversity to outcomes. Finally, companies need to be obligated to tie diversity to their company values.

For firms actively navigating these shifting tides among growing uncertainty, Stovall said: “Know the law, know what is politics and not policy, and hold firm where you can.”