A new study has confirmed that most US business and legal leaders believe scaling back diversity, equity and inclusion (DEI) initiatives may increase corporate risk. This includes legal exposure, financial and talent loss, and reputational damage.
Published by Catalyst in partnership with NYU Law’s Meltzer Center for Diversity, Inclusion, and Belonging, the report revealed that over 80% of C-suite leaders say companies should maintain or expand DEI efforts.
Entitled Risks of Retreat: The Enduring Inclusion Imperative, this report is one of the largest and most comprehensive workplace inclusion survey since recent executive orders. Drawing on responses from 2,500 employees, executives and legal professionals across organisations with active DEI programmes, the findings reflect a broad consensus: retreating from DEI is not a risk-free option.
THE INCLUSION ADVANTAGE
“Inclusion has never been a liability. It’s a competitive advantage and a business imperative,” said Jennifer McCollum, President and CEO of Catalyst. “The data proves that organisations committed to the principles of opportunity and fairness behind DEI will be the ones that outperform their peers, retain talent, and build lasting trust.”
The study uncovers widespread support for maintaining or expanding DEI efforts across corporate leadership, and reveals that:
- 83% of C-suite leaders and 88% of legal professionals believe DEI is essential to mitigating legal risk.
- 77% of executives link DEI directly to financial performance.
- 76% of employees — and 86% of Gen Z workers — say they are more likely to stay with an employer that supports DEI.
- A striking 61% of Gen Z say they would not even consider applying to companies that do not.
DEI AND TALENT RETENTION
Support for DEI is not only high among leadership, but also increasingly crucial to employee engagement and retention, particularly among younger generations. The report shows that:
- 86% of Gen Z employees and 78% of Millennials are more likely to stay with companies committed to DEI; compared with 71% of Gen X and 64% of Baby Boomers.
- Broad support extends beyond DEI terminology, with over 90% of employees endorsing inclusive hiring practices, employee resource groups, and bias training.
- Almost all (99%) agree that all workers should be treated with respect and fairness, regardless of background or identity.
“This isn’t about politics or buzzwords. It’s about what’s best for people and for business, today and in the future of work,” said Alixandra Pollack, Catalyst’s Vice President and Head of Solution Development. “Younger workers and women in particular are saying loud and clear: fairness and inclusion isn’t optional. It’s expected.”
DEI LINKS TO BUSINESS PERFORMANCE
Financial leaders increasingly view DEI as a growth driver, not a cost centre. The report highlights that:
- 77% of C-suite leaders see a positive correlation between DEI programmes and financial outcomes.
- 81% link DEI to enhanced customer loyalty.
- 69% of consumers say they are more likely to buy from brands supporting DEI. This fugure rises to 78% among Gen Z and 74% among women.
- More than one in three respondents would stop purchasing from companies that roll back DEI efforts.
WHY SCALING BACK CAN INCREASE LITIGATION RISKS
Perhaps the most striking finding is the legal risk associated with dismantling DEI initiatives. While some companies cite legal caution as a reason for retreat, the study warns that doing so may increase exposure to discrimination claims.
- 88% of legal leaders and 83% of executives agree that maintaining or expanding DEI mitigates legal risk.
- 65% of legal professionals and 68% of C-suite leaders believe scaling back increases risk.
- Respondents identified increased vulnerability to claims from women, people of colour, and LGBTQIA+ employees if DEI efforts are reduced.
“Opting out of DEI is not a neutral act. It’s a choice with consequences,” said Christina Joseph, Project Director of the Advancing DEI Initiative at the Meltzer Center. “These programmes help root out harmful policies that disproportionately impact marginalised groups. Without them, the risk of legal exposure rises.”
Kenji Yoshino, Chief Justice Earl Warren Professor of Constitutional Law at NYU School of Law, added: “This survey is a critical reminder of the substantial legal risks in the other direction.”
REPUTATION & TRUST MATTERS
In today’s hyper-transparent environment, employees and consumers are quick to react to perceived shifts in corporate values – especially on social media. The report identifies a growing perception gap:
- While 62% of C-suite leaders believe their organisations are maintaining or increasing DEI efforts, 24% of employees predict a decline – double the proportion of leaders who anticipate the same.
- 78% of leaders acknowledge rebranding DEI efforts under terms such as “workplace culture” or “belonging.” However, this change in language has led some employees to view these shifts as retreats rather than recalibrations.
- Employees are the top influencers of DEI strategy, not media or regulators, say executives.
“Organisations don’t need to retreat, they need to recalibrate,” said Tara Van Bommel, Head of Research at Catalyst. “That means understanding what ‘DEI’ really means to their employees and ensuring those values are reflected – and communicated – clearly.”
WAY FORWARD: RECALIBRATE, BUT DON’T RETREAT
The report offers four key recommendations for leaders navigating DEI in a more complex regulatory and social landscape:
- Assess risks holistically: Involve legal counsel to weigh legal, reputational, and workforce implications before altering DEI initiatives.
- Mitigate risk, maximise value: Rather than abandon DEI, adjust programmes as needed while staying aligned with stakeholder values.
- Bridge the perception gap: Align internal messaging with visible actions to sustain employee trust and engagement.
- Think long-term: Evaluate DEI through the lens of strategic, sustainable growth, not short-term reactionary pressures.
“Successful leaders understand that even in times of pressure and polarisation, it is important to resist knee-jerk reactions and quick fixes,” McCollum noted. “Organisations that stay true to their values will emerge stronger as we evolve through these uncertain times.”
David Glasgow, Executive Director of the Meltzer Center, concluded: “This report moves beyond the false binary of ‘shut it down’ or ‘stay the course,’ offering a pragmatic path forward that balances risk while remaining true to stakeholder values.”
RELATED ARTICLES
A new survey has revealed that seven in eight companies plan to continue with diversity, equity and inclusion (DEI) programmes in 2025 despite the recent political backlash.
US employees continue to strongly support workplace diversity, equity and inclusion (DEI) initiatives, despite growing political pressures and legal scrutiny, according to study.
CEOs double down on DEI & innovation amid rising uncertainty
Despite some recent backlash towards corporate inclusion efforts, employees worldwide confirm that having a diverse, equitable and inclusive workplace is important to them, a recent study has revealed.
Sign up for our newsletter
