Why DEI Is Needed Now More Than Ever—And Why the Trump Administration’s Actions Put Companies at Risk
The Trump administration’s recent DEI ban threatens to reverse decades of progress, putting companies at significant risk. For years, companies have approached DEI as a peripheral priority, rather than a strategic imperative. Given the lack of prioritization of DEI, it’s unsurprising that several corporations have announced they’re scaling back or abandoning DEI initiatives altogether. The speed at which corporations have dropped DEI initiatives in response to political shifts exposes the lack of genuine commitment to meaningful change. However, today’s leadership must recognize that diversity is a critical factor in driving innovation, market expansion, and business success.
The Need for DEI
Diverse and inclusive leadership brings varied perspectives, fosters innovation, and enables businesses to make smarter, more forward-thinking decisions. In fact, studies consistently show that companies with greater diversity are more likely to outperform their peers. S&P 500 companies with gender-diverse boards have a 15% higher ROE and 50% lower earnings risk. A report by Cloverpop shows that companies with inclusive teams make better decisions 87% of the time, leading to better financial performance. This is particularly evident in racial and ethnic diversity, which has been linked to higher profitability and better business outcomes.
The reality is that today’s consumers are more diverse than ever before, and companies need to adapt to match their customers. According to Census data, historically underrepresented groups comprise a growing share of the U.S. population. Younger consumers, who are overwhelmingly BIPOC and/or LGBTQ+ expect businesses to reflect their identities and values. Further, as companies expand into international markets, the need for DEI becomes even more critical. In global markets, understanding and embracing local cultural nuances, consumer behaviors, and values is key to success. Companies with diverse leadership teams exhibit increased global leadership competencies, helping them to better navigate regional markets and build authentic relationships with diverse customer segments, ultimately leading to stronger brand loyalty, improved customer engagement, and better market performance. Given changing domestic and international markets, DEI isn’t merely a social preference for businesses—it’s a financial reality.
Beyond customers, DEI initiatives positively impact companies’ capacity to manage their global supply chain efficiently and effectively. In an increasingly interconnected world, supply chains span multiple countries and continents. Diverse leadership teams bring greater understanding of regional regulations, helping companies identify, negotiate, and build stronger relationships with suppliers across the world. These leadership teams are also better positioned to understand and navigate the complexities of supply chains that are subject to a range of global trends and challenges, including unexpected disruptions such as pandemics, natural disasters, and geopolitical events. The COVID-19 pandemic exposed vulnerabilities in global supply chains, causing widespread shortages, transportation bottlenecks, and delays. Diverse and inclusive leadership is critical for anticipating the challenges of different regions and responding quickly to crises by drawing on different perspectives to identify innovative solutions. In turn, this allows companies to procure more reliable sourcing and stay adaptable in the face of crises, remaining resilient and growing even during challenges.
DEI is also important when considering local subsidiaries that companies set up internationally. Companies seeking to expand internationally can benefit greatly from having leadership that reflects the diversity of the local markets in which they operate. Local teams bring valuable insights into consumer behavior, industry challenges, and local business practices that may be overlooked by a homogenous leadership group. However, collaborating effectively with local teams requires being inclusive of the cultural nuances that give rise to diverse communication, work, and leadership styles. Global employees in local subsidiaries are more likely to feel engaged and valued when leadership is reflective of their own cultures, leading to improved employee morale, higher retention, and increased productivity.
Leadership Must Reflect the Market—or Risk Losing It
A review of several high-visibility corporations shows that companies thats fail to embrace DEI, both at home and internationally, risk significant setbacks. H&M's missteps in South Africa included a culturally insensitive ad that showcased a Black child wearing a hoodie with the slogan "coolest monkey in the jungle." The backlash was swift, triggering protests locally and social media outrage globally. This tone deaf ad highlighted the company’s lack of understanding of South Africa’s history of apartheid and ongoing racial sensitivities. This was further compounded by H&M’s broader failure to engage local communities in a meaningful way. This incident shows how not addressing DEI can result in public relations disasters and alienate customers.
Similarly, Google’s challenges in China have been primarily due to the company’s inability to understand the realities of operating in a region where government regulations and censorship heavily impact business practices. During its expansion, Google had numerous censorship disagreements; attempting to balance human rights, the company largely withdrew from the market. The company’s inability to recognize and navigate the political landscape in a way that respected local norms contributed to its lack of success. Google’s struggle with the Chinese government is ongoing, resulting in limited presence in China.
Then there's Walmart’s failures in Japan, South Korea, Brazil, Germany, and throughout Europe—highlighting a broad pattern of difficulties in adapting to diverse international markets. In all of these countries, the company struggled to adapt its business model and value proposition to the unique preferences and shopping habits of local consumers. Instead, it focused on a one-size-fits-all approach, continuing the same message used for American consumers. Walmart’s emphasis on low prices and large, warehouse-style stores clashed with local preferences for quality products from smaller, neighborhood-oriented stores. Additionally, Walmart’s lack of understanding of local supply chains and the cultural importance of customer service led to difficulties in establishing a strong brand presence against local companies. Ultimately, Walmart exited several countries, leading to billions of dollars in loss, while underscoring the risk of trying to replicate a one-size-fits-all model globally.
How DEI Could Have Mitigated Risk and Boosted Success
Companies such as H&M, Google, and Target could have benefited from incorporating DEI into their international strategies. For H&M, a more inclusive and culturally aware approach would have involved consulting with local communities to ensure that advertisements and messaging were sensitive to racial and cultural differences. By diversifying their marketing teams, the company could have avoided the backlash from their controversial "coolest monkey in the jungle" hoodie ad. A commitment to understanding local history and sensitivities, and engaging with diverse cultural perspectives would have allowed H&M to avoid alienating customers and instead expand into the local market.
For Google, recognizing the importance of both local norms and human rights would have allowed the company greater accessibility in China. Rather than withdrawing from the market due to censorship disagreements, Google could have worked with a diverse team of experts in Chinese politics and law, to better navigate the realities of operating in China. Diverse and inclusive decision-making would have been pivotal in finding ways for the company to balance human rights against local laws. Ultimately, this would have helped Google make smarter decisions about how to operate, ensuring that its products and services could meet Chinese regulatory requirements.
Likewise, had Walmart embraced DEI more effectively, the company might have seen success in international markets. By prioritizing DEI, Walmart would have been better equipped to understand and respond to consumer needs in each country it entered. Local talent, with their deep knowledge of regional preferences and shopping behaviors, could have guided the development of product offerings, marketing strategies, and store layouts that resonated with local consumers. Additionally, by fostering an inclusive environment, Walmart could have built stronger relationships with local communities, addressing issues such as customer service more effectively. Ultimately, a commitment to DEI could have helped the company tailor its approach in a way that respected local cultures and market dynamics, enabling it to better compete and thrive internationally.
Other companies looking to expand internationally can learn from the examples of H&M, Google, and Walmart by applying DEI strategies to avoid similar missteps. By actively engaging with diverse voices, investing in inclusive leadership, and ensuring that global strategies reflect local culture, companies can create stronger brand reputations, grow in new markets, and increase brand loyalty worldwide.
The Future of Executive Leadership: Beyond DEI to Strategic Representation
Global leadership today requires navigating complex, multicultural landscapes. The largest corporations do business on an international scale, and companies that embrace DEI in leadership have a competitive edge. When businesses retreat from DEI efforts under political pressure, they don’t just risk public backlash—they risk becoming obsolete in a world that demands inclusivity and representation.
However, for organizations that want to thrive in the future economy, DEI is just the baseline. The real goal is strategic representation—ensuring that leadership teams are not only diverse but also empowered with decision-making authority and influence. This means moving beyond performative DEI efforts and embedding diversity into leadership pipelines, boardrooms, and executive strategies.
