Why scaling back on equity is more than risky — it’s economically irresponsible

When Target reversed course on DEI in early 2025, the backlash was explosive. Civil rights leaders launched a 40-day boycott, warning that the company’s rollback signaled a betrayal of the very communities that propelled its growth. Plans for a “Target Fast” soon drew over 110,000 sign-ups from consumers and faith leaders pressing for accountability and investment in Black-owned businesses. The campaign delivered a direct hit: Store traffic fell 6.8% and the stock dropped 32.17%, amounting to an approximately $19B contraction of their market cap.

Since 2023, a wave of high-profile corporations — from Meta, Google, and Goldman Sachs to Disney, Deloitte, and Walmart — have rolled back DEI commitments made in the wake of George Floyd’s murder in 2020. Reversals have ranged from quietly dropping equity-based hiring targets or stepping back from public-facing commitments to rescinding requirements for board-level diversity in IPOs to rebranding or completely disbanding dedicated DEI teams. 

The trend is growing: A January 2025 survey found that one in eight U.S. companies planned to scale back or eliminate DEI programming.

These backtracks come at a time when legal rulings, political polarization, and economic uncertainty are prompting some companies to see DEI as expendable, or even risky to their public image.

But make no mistake: Scaling back equity initiatives isn’t a neutral decision. And it’s not just a question of politics or optics. As a gender economist, I’ve spent years examining how inclusive systems strengthen our workforce, our businesses, and our economy. And the evidence has only grown stronger. Equity drives innovation. It improves employee retention. It bolsters resilience in volatile markets. So when companies abandon DEI, they’re not just risking fallout — they’re undercutting their viability.

Equity drives revenue and lifts profits

DEI is embedded in how organizations design who gets to make decisions, whose ideas get funded, and whose futures are prioritized. To dismantle those structures — explicitly or through neglect — is to reinforce default systems of exclusion that no longer serve the demands of a modern economy.

Equity, on the other hand, meets the moment. Every 10% increase in intersectional gender equity drives a 1–2% bump in revenue. Companies with above-average leadership diversity see 19% more revenue from new products and services. Those with high diversity scores generate 45% of their revenue from innovation. For less equitable companies, that number drops to 26%.

And higher revenues are only part of the story. Equitable companies also report better margins.

Companies with greater diversity across gender, race, and age see 9% higher EBIT margins. Organizations in the top quartile for executive gender diversity are 25% more likely to outperform on profitability. For ethnic diversity, that likelihood is 36%.

What’s driving these gains? Better decision-making. Wider talent pools. Avoidance of groupthink. Companies that include more voices make smarter, more agile, and more profitable choices.

Equity fuels innovation

In high-growth industries, innovation is everything. And inclusion is the fuel.

Teams that are inclusive across gender, race, and experience are 59% more likely to report increased creativity and innovation. They also solve problems faster and file more high-quality patents. Companies with inclusive management practices earn 38% more revenue from innovative products, and inclusive teams outperform homogeneous teams 87% of the time in decision-making. 

In fast-moving industries like tech, pharma, and finance, such differentiation is game-changing. When companies slash DEI, they’re not just trimming budgets; they’re cutting off the lifeblood of their future competitiveness.

Equity retains talent and protects reputation

Retreating from equity isn’t a return to “neutral;” it’s a reversion to legacy systems that were never neutral to begin with. Equity, when done well, redesigns who holds power, who feels safe contributing ideas, and who stays in the room. Design, after all, is a lever of power, one that determines which voices shape the future of a company and which are silenced.

That’s why inclusive companies see 22% lower turnover. The potential cost savings of strong retention practices are especially significant when you consider the fact that replacing a single employee can cost up to two times their salary. In tech, culture-related turnover costs the industry $16B a year.

Employees who feel included, meanwhile, are 2.6 times more likely to stay. And that’s not just true for underrepresented groups. Inclusion benefits everyone.

Companies that will lead the future won’t abandon equity when the headlines shift. They’ll operationalize it. They’ll refine it with rigor. They’ll embed it where it belongs: in the systems that shape performance.

Inclusion also drives productivity. Companies with highly inclusive teams see 78% lower absenteeism. A 10% increase in inclusion perception yields nearly one extra day of attendance per employee per year. That’s real value, unlocked not by bonuses or perks, but by inclusion.

Moreover, companies that scale back DEI aren’t just losing current talent; they’re shrinking their future talent pipeline. More than three-quarters (76%) of job seekers — and an even higher percentage of Gen Z — care whether a company has an equitable workforce. 

Consumers and investors also care. Target’s business crisis this year is evidence of this reality. Some shareholders have already rebuked companies like Walmart for reversing DEI commitments, citing reputational harm and diminished long-term value. For institutional investors, DEI is a proxy for long-term stability. Inclusive companies earn higher ESG ratings. They’re perceived as lower risk and better governed. Pulling back invites scrutiny and shareholder concern.

The bottom line

Distancing from DEI might appear tactical — a quiet retreat amid noise. But it’s a strategic miscalculation with cascading costs. The short-term savings are surface level. The deeper toll — in innovation lost, talent drained, resilience weakened, and trust eroded — runs through the core of the business.

The companies that will lead the future won’t abandon equity when the headlines shift. They’ll operationalize it. They’ll refine it with rigor. They’ll embed it where it belongs: in the systems that shape performance, perception, and prosperity.

Not because it’s politically expedient. Not because it’s morally expected. But because it works.

In a volatile economy, equity isn’t a liability to be managed. It’s a design principle for resilience and a lever for enduring value creation.