As the Supreme Court's landmark on race-based college admissions settles, one thing is clear: ESG policies that use race also could be viewed as discriminatory and a constitutional violation.
The court's ruling that private universities cannot use race as a factor for admission, experts say the ruling could impact the labor market, leaving private companies for significant legal damages if they use "diversity" and "inclusion" to hire and promote based on race, gender or orientation.
The rise of woke policies for companies — known as ESG or environmental, social, and corporate governance rules, have led many private enterprises embracing a subset of these with so called DEI or diversity, equity, and inclusion programs.
But the Supreme Court's decision to strike down race-conscious admissions programs in their rulings on Thursday against Harvard and the University of North Carolina could have a wide reach.
"The Supreme Court's ruling makes clear that it is discrimination to award and deny opportunities based on racial categories," said Cory Liu, an attorney at Butler Snow LLP and a Harvard Law School alumni.
"Any employer who treats applicants differently based on race is guilty of violating our nation's civil rights laws."
Conservative advocacy groups believe the ruling could have a similarly wide reach across the private sector.
"Although this ruling applies specifically to college admissions, any ruling by the Supreme Court that reaffirms the fundamental idea that ours is a colorblind Constitution and a colorblind society should make those who would inject race into hiring decisions think twice," said Jenny Beth Martin, honorary chair of Tea Party Patriots Action.
"This week's ruling is a step in the right direction," she said.
The high court's decision, while legally limited to education, essentially determined that diversity requirements are de facto discriminatory and unlawful and could face legal challenges.
And by restricting affirmative action, legal experts say the days of people getting jobs based on their race and a company's "inclusion" policies could be numbered.
"It is possible we could see some more legal challenges to racial programs at private businesses because people may feel emboldened by this decision and try to get relief in the courts," said Brian Fitzpatrick, the Milton R. Underwood Chair in Free Enterprise at Vanderbilt University Law School.
But he said private businesses are "not restricted by the U.S. Constitution" in the same way governments are limited.
Fitzpatrick points out that the only reason Harvard University was found to be in violation of the law is because it receives federal money.
But conservatives note that almost every major company in the U.S. does business with the federal government, putting them in the crosshairs of the new ruling.
Harvard was accused of breaking Title VI of the Civil Rights Act of 1964, which bars discrimination based on race, color, or national origin under any program or activity receiving federal financial assistance.
While private businesses are bound by other statutes, Fitzpatrick said it is much more likely to see state governments that give preference to hiring people because of race now held to the ruling in the same fashion as UNC, a public institution.
The court found that UNC's decision as a public university to adopt a non-race-neutral admissions policy violated the guarantee to equal protection of the law under the Constitution's 14th Amendment.
"All state governments are going to be bound by the ruling just like UNC was," Fitzpatrick said. "If states are giving preferences to people because of race, whether in hiring or government contracting, there's going to be a potential avenue for new challenges to those laws."
He added that it is not going to be as straight of a line to go from the rulings to private businesses.
Mike Gonzalez, a senior fellow at The Heritage Foundation, agrees, saying that just because racial preferences have been eliminated in college admissions doesn't mean the eradication of DEI is next.
But he said the ruling does make the fight "easier."
"We should not be making any decisions based on race in the public realm," Gonzalez said.
"Companies should not be able to hire and/or promote based on something as superficial as skin color, an immutable trait that does not determine behavior, character, morality, nor any of the other characteristics that should guide hiring and promotion."
"DEI was always a scam because it was based on the corruption of the language," Gonzalez said. "If the three words contained in the abbreviation retained their original meaning, then there should be no problem.
"But they now mean the opposite: inclusion means language codes, diversity means quotas — which are illegal — and equity means the government and the private sector treating people differently because of their race."
With DEI "already on the ropes," he said the high court's decision puts "DEI on the sights of the law all the more" and will allow conservatives to be "more aggressive with federally funded private institutions, at the very least."
Josh Blackman, a law professor at the South Texas College of Law Houston, agrees that while the decision doesn't "directly affect DEI programs," it does "create a window for future legal challenges."
"Specifically, businesses can be charged with ‘reverse discrimination,' that is, using policies that purport to help one race of employees at the expense of negatively harming others," he said. "These issues will be in the courts for years."
Even if employees challenge their employers' DEI programs, however, experts don't expect them to disappear.
Devon Westhill, president and general counsel for the Center for Equal Opportunity, said there is and "likely will remain intense pressure on employers to engage in DEI actions that take race into account."
While the court has "never sanctioned making race distinctions for workplace diversity," he said employers "should be motivated to reevaluate their diversity initiatives to ensure they comply with the law."