Organizations are facing growing legal and social threats to DEI programs in today’s climate, sparking consideration of scaling back or abandoning them. However, Catalyst’s recent report, Risks of Retreat: The Path Forward, a 2025 survey of 2,500 U.S. employees, including executives, legal leaders, and staff, makes it clear that retreating from DEI programs doesn’t eliminate risk- it increases it.
They specify that companies that scale back their efforts face four critical dangers: talent loss, financial setbacks, legal liability, and reputational damage.
Key Risks of Retreating from DEI
- Talent Risk
A strong majority, 76% of employees are more likely to stay with an employer that maintains DEI efforts. Particularly, 61% of Gen Z employees would refuse to apply to organizations that do not support DEI. - Financial Risk
- Consumers are drawn to companies that visibly support DEI, driving loyalty and spending.
- Leaders see past and future financial gains linked to inclusive practices.
- Legal Risk
Retreating from DEI can expose organizations to greater legal liability, including discrimination claims. The report outlines a “three-Ps” framework (Preference, Protected Group, Palpable Benefit) to assess program risks. Retreat doesn’t eliminate legal danger; it often amplifies it. - Reputational Risk
Leaders may believe DEI remains strong, but employees often question that commitment revealing a perception gap that undermines trust and credibility.
Controversy over equity programs has been raised since the passage of the Civil Right Act of 1964, with numerous cases challenging its validity. I did legal research concerning disparities in public contracting, with regards to Initiative 200, which was interpreted as a ban to end equity programs, in Washington state. I was very surprised to see that I-200 affected public contracts in a way that 18% of contracts were reduced to a level of 2%. It took much effort for the agencies to bring back the equity programs to train and mentor businesses at least.
As we all saw, Target suffered major setbacks when they retreated from DEI. But Costco didn’t suffer any consequences in keeping their DEI programs but had a 7% rise in net sales compared to the previous year. Their fearless leadership brought public admiration along with profits.
Businesses do not need to fall back with their DEI programs considering the risks of retreating. The question is no longer whether DEI is worth the investment.
With every social change, companies are puzzled how to align their people programs strategically. So the question is: How do we make DEI authentic, sustainable, and tied to the DNA of the organization?
The answer lies in your core values.
Why Core Values Matter
Core values are more than words on a wall. They are a company’s compass, guiding decisions in times of change. When DEI efforts are aligned with values, they move beyond compliance checklists and become part of everyday business practice.
At Core of a Leader, the guiding values & problem-solving framework is- BEAR.
Be Truthful
Evaluate
Appreciate,
and Rise above.
Catalyst’s Strategic “Path Forward”: Four Recommendations – Through a Values Lens & BEAR framework:
Catalyst authors propose four strategic actions to help organizations sustain fair and inclusive work while managing risk thoughtfully. And, every company has its own set – integrity, respect, excellence, collaboration, innovation, or others. Those are your true colors, your compass which lead you in your decision making.
- Assess Risk from All Angles → Be Truthful
Catalyst urges companies to weigh both the risks of keeping DEI and the risks of retreating. “Being truthful” means naming those risks openly. For example: If we step back, what does that mean for our credibility with Gen Z talent? For our global reputation? What does it mean to our employees? What are our goals with our people?
- Mitigate Risk While Maximizing Impact → Evaluate
Catalyst suggests shifting from preference-based initiatives to barrier-removing ones.
Here- I want to point out this aspect of Civil Rights Act and DEI, since I did legal research based on Civil Rights Act.
Controversy over equity programs has been raised since the passage of the Civil Right Act of 1964, because everyone interpreted those are ‘preferences’.
Preferential treatment is clearly prohibited in the original version of the Civil Rights Act of 1964. “Nothing contained in this [law] shall be interpreted to require any employer, employment agency, labor organization, or joint labor-management committee subject to this [law] to grant preferential treatment to any individual or to any group because of the race, color, religion, sex, or national origin…”
Section 703(J) of Title VII of the Civil Rights Act of 1964, which was later codified as part of the U.S. Code. This provision clarifies that Title VII does not mandate preferential treatment to remedy an existing statistical imbalance in the workplace, prohibiting the use of such preferences to address disparities in race, color, religion, sex, or national origin.
Preferential treatment is nepotism or favoritism, and it is another form of discrimination. If preferential treatment is prohibited in the Civil Rights Act of 1964, why is everyone talking about it as if that is DEI? This is a puzzle for me even now.
If cohort groups are what it means to be ‘preference’, they do not gain any benefit being an employee group- right? Will any company promote someone just because they were a part of a cohort group?
Where it is a problem is- if someone denies membership to someone of these programs. Every cohort group should be open to everyone. One of my workplaces, in a woman support cohort group, men also came to support their activities.
So how I take this is:
“Evaluate” means checking whether each program aligns with both values and legal soundness. Are these programs providing any tangible benefits just being in the support group? How do these programs elevate the company core values and net worth? What are the data available to prove it?
- Walk the Talk and Talk the Walk → Appreciate
Transparency is key. Employees want to know not just what’s changing, but why. “Appreciate” reminds us to recognize and honor the concerns of employees, especially those from underrepresented groups, while reinforcing the company’s values in every message.
- Take the Big Picture View → Rise Above
Catalyst highlights the importance of not overreacting to short-term pressures. “Rise Above” means holding to long-term commitments, even when everything else is noisy. Companies that rise above today’s turbulence will be positioned as tomorrow’s leaders.
A purposeful approach, grounded in core values and adaptive strategy will help organizations maintain inclusive culture in a shifting landscape.
STAY IN THE LOOP
Subscribe to Core of a Leader newsletters.
Wellness and well-being – The power of employee well-being at work: When most organizations talk about “wellness,” the conversation usually centers on health. Gym memberships, step challenges, healthy snacks, or a mindfulness app. These are valuable, but they only touch a small part of the picture. Because wellness is about health. Well-being is about the
What is DEI? If you take the word itself, it is ‘Diversity, Equity and Inclusion’. We all know the meaning of it in English. If it is about a garden, we have different types and colors of plants which produce flowers- that is diversity. You give each plant nourishment and care based on that particular
“Every one of us has the innate ability to solve problems, which are specific and true to each of us-our core strengths- or true colors. Understanding them help an individual to become the best version of self.” This is one of the core concepts of TRU Color Methodology. What are Innate abilities of a person?
