Companies Not Swearing By DEI Programmes Fear Lawsuits For ‘Traditional Discrimination’

The Women's Business Enterprise National Council, a non-profit that last year named Walmart one of America's top corporation for women-owned enterprises, said it was still evaluating the impact of Walmart's announcement.

Walmart's sweeping rollback of its diversity policies is the strongest indication yet of a profound shift taking hold at US companies that are re-evaluating the legal and political risks associated with bold programmes to bolster historically under-represented groups.

The changes announced by the world's biggest retailer followed a string of legal victories by conservative groups that have filed an onslaught of lawsuits challenging corporate and federal programmes aimed at elevating minority and women-owned businesses and employees.

The retreat from such programmes crystalised with the election of Donald Trump, whose administration is certain to make dismantling diversity, equity and inclusion (DEI) programmes a priority. Trump's incoming deputy chief of policy will be his former adviser Stephen Miller, who leads a group called America First Legal that has aggressively challenged corporate DEI policies. “There has been a lot of reassessment of risk looking at programmes that could be deemed to constitute reverse discrimination,” said Allan Schweyer, principal researcher at the Human Capital Centre at the Conference Board.

Among other changes, Walmart said it will no longer give priority treatment to suppliers owned by women or minorities. The company also will not renew a five-year commitment for a racial equity centre set up in 2020 after the police killing of George Floyd. And it pulled out of a prominent gay rights index. Schweyer said the biggest trigger for companies making such changes is simply a reassessment of their legal risk exposure, which began after US Supreme Court's ruling in June 2023 that ended affirmative action in college admissions. Since then, conservative groups using similar arguments have secured court victories against various diversity programs, especially those that steer contracts to minority or women-owned businesses.

Most recently, the conservative Wisconsin Institute for Law & Liberty won a victory in a case against the US Department of Transportation over its use of a programme that gives priority to minority-owned businesses when it awards contracts.

Companies are seeing a big legal risk in continuing with DEI efforts, said Dan Lennington, a deputy counsel at the institute.

The Trump administration is also likely to take direct aim at DEI initiatives through executive orders and other policies that affect private companies, especially federal contractors.

Marc Morial, CEO of the National Urban League, a civil rights group that has worked with Walmart on diversity and inclusion efforts in the past, called the company's pullback from DEI “stunning" and “unexpected.”

“This is inconsistent with the Walmart I know,” said Morial, who argued that DEI policies are how organisations ensure compliance with federal anti-discrimination laws like the Civil Rights Act of 1964 and any suggestion of favouritism or preferential treatment “is really defamatory against what DEI represents.”

A recent survey by Pew Research Centre showed that workers are divided on the merits of DEI policies. While still broadly popular, the share of workers who said focusing on workplace diversity was mostly a good thing fell to 52 per cent in the October survey, compared to 56 per cent in a similar survey in February 2023.

Rachel Minkin, a research associate at Pew, called it a small but significant shift in short amount of time. There will be more companies pulling back from their DEI policies, but it likely won't be a retreat across the board, said David Glasgow, executive director of the Meltzer Centre for Diversity, Inclusion and Belonging at New York University.

One reason DEI programmes exist is because without those programmes, companies may be vulnerable to lawsuits for traditional discrimination. “Really think carefully about the risks in all directions on this topic,” Glasgow said. Walmart confirmed will no longer consider race and gender as a litmus test to improve diversity when it offers supplier contracts. Walmart says its US businesses sourced more than $13 billion in goods and services from diverse suppliers in fiscal year 2024, including businesses owned by minorities, women and veterans.

Organisations that have partnered with Walmart on its diversity initiatives offered a cautious response. The Women's Business Enterprise National Council, a non-profit that last year named Walmart one of America's top corporation for women-owned enterprises, said it was still evaluating the impact of Walmart's announcement. Pamela Prince-Eason, the president and CEO of the organisation, said she hoped Walmart's need to cater to its diverse customer base will continue to drive contracts to women-owned suppliers even if the company has no explicit dollar goals.

Walmart's announcement came after the company spoke directly with conservative political commentator and activist Robby Starbuck, who has been going after corporate DEI policies, calling out individual companies on X. Several of those companies have subsequently announced that they are pulling back their initiatives, including Ford, Harley-Davidson, Lowe's and Tractor Supply. Walmart said that it will better monitor its third-party marketplace items to make sure they don't feature sexual and trans-gender products aimed at minors.

The company also will stop participating in the Human Rights Campaign's annual benchmark index that measures workplace inclusion for LGBTQ+ employees. A Walmart spokesperson added that some of the changes were already in progress and not as a result of conversations that it had with Starbuck. RaShawn “Shawnie” Hawkins, senior director of the HRC Foundation's Workplace Equality Programme, said companies that “abandon” their commitments workplace inclusion policies “are shirking their responsibility to their employees, consumers, and shareholders.” She said the buying power of LGBTQ customers is powerful and noted that the index will have record participation of more than 1,400 companies in 2025.