Report: DEI Push Slows in US Companies

Diversity, equity and inclusion (DEI) efforts by U.S. companies are losing momentum this year after the Supreme Court in June struck down affirmative action in colleges, according to a report released Monday by DEI consulting firm Paradigm.

This is a sharp reversal from the dramatic increase in corporate DEI after George Floyd's killing by police in 2020 pushed companies to address racial inequality.

This year "has undeniably shifted the DEI landscape for years to come," the authors of the report wrote, adding that "external forces are no longer pushing companies to invest in DEI; instead, in some cases, external forces are pushing back on companies' investment in DEI."

Since the Supreme Court ruling that universities can't explicitly consider race in the admissions process, the group that brought that case, American Alliance for Equal Rights, has sued two law firms, Axios reported.

The lawsuits challenged minority fellowships that were open only to students of color, those who identify as LGBTQ+, or those who have disabilities, arguing that this discriminated against other groups — such as whites, straight people, or those who do not have disabilities.

The lawsuits were dropped after the law firms revised the programs by broadening their criteria to all law students at a certain stage of school.

Also, after the Supreme Court ruling, 13 Republican state attorneys general urged Fortune 100 companies in a letter to review their DEI programs, taking aim at "explicit racial quotas in hiring, recruiting retention, promotion and advancement."

The Paradigm report stated that not only will the lawsuits and letters "have significant downstream consequences for DEI for years to come," companies had already de-prioritized DEI as the hiring frenzy of the past few years has slowed.

Paradigm CEO Joelle Emerson said corporate DEI is essentially the practice of making sure there are "fair outcomes" in hiring and promotion, but that its meaning gets twisted in the discourse.

For its report, Paradigm examined anonymized data from 148 clients; about a third were in tech and about a quarter were large firms with 1,000-10,000 employees. 

Those participating in the study were motivated companies already working with a DEI consultant, but firms cut spending on DEI budgets from the previous year, and fewer firms had a DEI strategy.

However, more companies had hired a senior DEI leader, and about 40% of firms track race/ethnicity representation.

Many companies say they are still committed to diversity, equity and inclusion, with a Bloomberg analysis noting that DEI efforts made in 2020 had a significant impact — as 94% of the headcount increase at large firms in 2021, from the previous year, were a result of hiring people of color.

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