By Dr Achilleas Boukis, Associate Professor in Marketing
Birmingham Business School, University of Birmingham
Several prominent global organisations, including technology giants such as Meta, Amazon, and Zoom, retailers like Walmart, and automotive companies such as Ford and Harley-Davidson, are scaling back their Diversity, Equity, and Inclusion (DEI) initiatives. These decisions appear to be largely driven by shifting political, economic, and cultural pressures. In contrast, companies like Costco, Apple, and JP Morgan seem to be resisting this trend, maintaining their commitment to DEI practices despite these challenges.
A couple of years ago it would have been unimaginable to witness a regression of hard-won social rights. Unquestionably, this trend represents a risky step back from corporate responsibility in today’s business landscape but surprisingly, this seems to have become an increasingly important strategic choice for companies to (re)consider. Is there really a need for strategy for companies to a stand? Should they stay silent? What is the managerial thinking behind these decisions?
To some extent, EDI rollbacks seem to be predominantly initiated in certain industries (e.g. tech) and largely driven by current market sentiment and government mandates (e.g. US). From a strategic perspective, such moves appear quite opportunistic and highly reactive to the new social orientation the new US administration seems to advance. DEI pushbacks signal that companies lack a long-term social vision and that they are prioritising short-term thinking over strategising for a competitive advantage in the long term.
This survival-thinking mode also reflects firms’ wariness of increasing consumer backlash against the woke movement and is partially triggered by the unpredictability of the economic and political environment. Interestingly, there are some important short-term benefits of EDI rollbacks. For instance, companies can easier streamline their management processes and eliminate such resource-intensive initiatives while allocating these resources to other firm activities (e.g. innovation) with more immediate return than DEI initiatives. At the same time, companies might avoid backlash from certain stakeholders (e.g. government) or turn this into an opportunity to signal their emphasis merit-based hiring and promotions. For some companies that largely represent more regressive/conservative audiences, this might indeed be the beginning of a revised social orientation. Nevertheless, the long-term consequences of disengagement from DEI initiatives far outweigh these financial and operational advantages.
Like advertising, DEI policies are an investment in the future of the company’s reputation and do not tend to produce immediate returns. Interestingly, DEI scale-backs contradict the long-standing efforts of numerous firms to move away from a profit-oriented logic and become more purpose-driven, while also undermining the value of social responsibility and diversity initiatives in the future. Companies like McDonald’s and Walmart that curbed EDI policies also run the risk of becoming less attractive when reaching out for talent from younger generations (particularly Gen Z, who prioritise diversity and inclusivity) and diverse population groups (e.g. immigrants), despite a significant part of their workforce coming from these groups.
Companies that set aside diversity initiatives also seem to overlook the potential toll on their employees and workplace culture. DEI policies are widely seen as supportive of employees: they can improve mental health, make employees feel that their voices are valued, reduce groupthink biases, and enhance ideation, among other benefits. How do large-scale organizations like META plan to re-build a purpose-driven culture and repair their relationship with their largely progressive workforce? From a marketing perspective, the dismantling of DEI initiatives threatens to undo years of investment in supporting social and ethical causes, damaging companies’ brand reputation and their consistent effort over the years to position themselves as socially oriented organisations. This toll from the EDI department is expected to be higher for companies like Nike or Patagonia, which are actively pursuing an activist orientation.
A third approach for companies is to go quiet, despite the wave of anti-DEI rhetoric sweeping parts of the business world. As such initiatives come under attack, some companies choose to rebrand DEI programs or subtly incorporate them into their corporate communication. However, for market leaders, remaining silent in an increasingly polarized market and consumer environment is not an easy option. Delayed action may be even less attractive, as Yorkshire Tea discovered when Black Lives Matters critics praised their silence about the movement. Unlike short-term, reactive measures, such as the US government placing all staff on DEI schemes on administrative leave, companies may take a more cautious and strategic approach.
Instead of viewing DEI initiatives as a compliance exercise, organisations should recognise it as part of their competitive strategic advantage. It is in the time of crises and social divisions that companies can stand up and build their character, just like Nike with the Colin Kaepernick Campaign.
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The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the University of Birmingham.