A new national study reveals that most U.S. businesses and legal leaders believe scaling back diversity, equity, and inclusion (DEI) initiatives may increase corporate risk—including legal exposure, financial and talent loss, and reputational damage.
The research, conducted by Catalyst and NYU School of Law’s Meltzer Center for Diversity, Inclusion, and Belonging, surveyed 2,500 employees, executives, and legal leaders across U.S. companies with active workplace inclusion programs. The report is the largest workplace inclusion survey since recent executive orders on DEI. It offers insights into what these programs look like in practice; how leaders and employees feel about the core tenets of diversity and inclusion initiatives; and what’s at stake if they’re scaled back or rebranded.
“Inclusion has never been a liability—it’s a competitive advantage and a business imperative,” says Jennifer McCollum, president and CEO of Catalyst. “The data proves that organizations committed to the principles of opportunity and fairness behind DEI will be the ones that outperform their peers, retain talent, and build lasting trust.”
Key findings on the risks of retreat include the following.
- DEI impacts talent retention, especially among younger generations. The research shows that most employees want companies to stay committed to inclusion, with Gen Z and millennials significantly more likely to seek out employers with a visible commitment to inclusion and equity. And most C-suite leaders (84%) see a positive correlation between their inclusion programs and employee attraction. More than three-quarters (76%) of employees say they are more likely to stay with an employer that supports DEI, and 61% of Gen Z employees say they would never apply to a company that doesn’t support DEI. DEI also increases retention across generations, including 64% of baby boomers, 71% of Gen X, 78% of millennials, and 86% of Gen Z employees. Additionally, more than eight in 10 employees support core practices of DEI like inclusive hiring (90%), employee resource groups (93%), and bias training (88%).
- DEI is strongly linked to business performance and consumer loyalty. Leaders across industries continue to view DEI as a smart business investment, with clear links to financial performance and consumer loyalty. The data shows that scaling back on inclusion efforts poses a potential business liability and also reveals that consumers are paying attention—most respondents are more likely to buy from brands that support DEI.
- Leaders also see a legal risk in DEI rollbacks. The survey findings are particularly striking when it comes to legal risk. While lawsuits and the actions of the federal administration have made DEI more legally risky, there are also risks in abandoning long-time efforts to fight discrimination. A strong majority of legal leaders say companies should retain or even expand their DEI programs and warn that reducing or eliminating these initiatives could increase the likelihood of litigation—particularly traditional discrimination claims brought by women, people of color, and LGBTQIA+ employees.
- The perception of retreat can erode trust and harm the organization’s reputation. In an environment where it’s easy for employees and customers to call out organizations on social media, leaders must be alert to the reputational damage their words, actions, and inactions can cause. Most C-suite leaders (78%) say they are rebranding DEI efforts under new terms like “employee engagement,” “workplace culture,” “belonging,” or “fairness” — but that the substance and commitment to the work remains strong. Yet the survey finds employees are losing faith, with more employees than leaders predicting DEI practices will become less embedded at their workplace in the next five years.
“Organizations don’t need to retreat, they need to recalibrate,” says Tara Van Bommel, head of research at Catalyst. “That means understanding what ‘DEI’ really means to their employees and their customers and ensuring they are still reflecting and communicating those values. Employees across the board — and younger workers especially— are telling us this matters, and smart organizations are listening.”
