The word diversity itself appears to trigger a wide variety of emotions from its equally wide array of definitions. This means that in the diversity space, we have really poor signal or a lot of noise.
According to a recent study conducted by Teneo, DEI efforts remain in the spotlight, even as companies navigate heightened scrutiny and shifting cultural landscapes.
Despite ongoing challenges, 94% of companies still include "DEI" in some capacity within their ESG (Environmental, Social, and Governance) reports, showing only a slight decline from the previous year. For many companies, the narrative has evolved, broadening to emphasise themes like "belonging" and "inclusion."
The use of DEI terminology has become a focal point of contention. In 2023, virtually all companies used the DEI acronym; today, 94% continue to do so.
However, more companies are prioritising inclusion first, reframing their approach to reduce controversy. For others, terms like "culture" or "belonging" are being used to replace the direct DEI acronym while maintaining the core message.
A key metric for DEI continues to be demographic data. Almost every company, 97% to be exact, reports on workforce demographics in some form. There has also been a 32% increase in the disclosure of Equal Employment Opportunity (EEO-1) reports. Companies are opting for these frameworks to align themselves with standardised disclosure, reflecting a commitment to transparency that may also protect them from backlash.
Recent DEI headlines have come in with fire and fury, from USA Today screaming “The War On ‘Woke’ America Has A New Commander-In-Chief” to Ad Age touting “The End Of The Chief Diversity Officer” and Fast Company claiming “RIP DEI.” While these headlines are a bit heavy-handed, the message they convey has a singular theme: “identity-based DEI” will soon face a barrage of upcoming scrutiny, criticism and legal challenges. - Doug Melville for Forbes.com
About 43% of the S&P 500 still publicly maintain DEI goals in their sustainability reports, with many of these targets remaining unchanged from last year. The most commonly cited are representation goals, noted by one-third of companies, while supplier diversity goals are present in 14%. A smaller but notable portion includes goals for recruiting from Historically Black Colleges and Universities (HBCUs) and investing in underrepresented communities.
However, some companies are scaling back: 24 organisations have omitted specific DEI goals, including those related to representation and supplier diversity. On the flip side, some companies are setting new targets, emphasising the complexity of navigating DEI goals in light of new challenges like the recent Supreme Court ruling on affirmative action.
Programs like mentorships, fellowships, internships, and scholarships targeting specific demographics are featured in 67% of corporate reports. While there is growing criticism that these initiatives can be exclusionary, many organizations position them as fundamental parts of a holistic recruiting strategy aimed at tapping into diverse talent pools.
Supplier diversity remains a core pillar of DEI initiatives, with 78% of companies continuing to disclose related activities. Companies recognise that diverse supplier relationships add strategic business value, enhancing supply chain resilience and fostering innovation. Despite political pressure against DEI, supplier diversity programs are largely being maintained.
Visible diversity is becoming a liability, but invisible diversity is a huge opportunity. - Forbes.com
In 2024, nearly two-thirds of companies reported conducting pay gap audits, and 45% disclosed the results. The focus remains on global gender pay gaps and U.S. race/ethnicity pay gaps, with 40% of companies reporting these statistics. Notably, there has been an increase in third-party assurance for pay gap audits, rising from 33% to 42%, indicating greater investment in and verification of these claims.
Adjusted pay gap reporting focuses on equal pay for similar roles, while unadjusted reporting simply examines raw median pay differences across the workforce. Both methods are increasingly featured in ESG reports as companies aim to maintain transparency and fairness.
As DEI remains under scrutiny, communicating initiatives effectively becomes vital. Companies need to articulate clearly how DEI aligns with their business priorities, focusing on measurable outcomes and genuine impact. As ESG reports continue to evolve, they must convey how DEI initiatives bring tangible value to both the company and its stakeholders.
For companies that consider DEI financially material, changes to their DEI policies will likely prompt questions from investors. Transparent and strategic communications will be essential to navigate these evolving expectations while balancing multiple stakeholder perspectives.
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