Is it the end of the rainbow for diversity and inclusion?

When I first planned the February-March issue of Ethical Corporation magazine last September, my only thinking was that we hadn’t focused on the diversity and inclusion agenda for business in a while.

Then last November, when Walmart announced, after Donald Trump’s resounding victory in the U.S. presidential elections, that it was stepping back from its diversity and inclusion (DEI) initiatives, I realised that our February-March issue was going to be newsier than usual.

Little did I expect that the newly inaugurated president would move so quickly to turn his “anti-woke” election campaign into a weapons-grade offensive. ?Fortunately, our Reuters News colleagues have helped us keep up to speed with their comprehensive coverage as company after company has ditched DEI policies over the past several weeks.

You can download the issue for free by clicking here

As Mark Hillsdon reports in his opening article, the corporate retreat from DEI began after July 2023, when a U.S. Supreme Court ruling that race-based affirmation action in college admissions was unconstitutional led attorney-generals from 13 Republican-run states to threaten legal action against Fortune 500 companies.

Companies have also been besieged by shareholder proposals from conservative groups such as the National Center for Public Policy Research to remove links between diversity initiatives and executive pay, and examine DEI initiatives for legal and reputational risks.

The pressure has only stepped up in the weeks since the inauguration. Picking out just one example: after Target announced it had dropped its DEI programmes, shareholders in Florida launched a class action saying that the company had defrauded them into paying inflated prices for its stock and supporting management's "misuse of investor funds to serve political and social goals".

Some companies, including Apple, JP Morgan & Chase, Microsoft and Costco have stood firm; others, like McDonald’s appear to be recalibrating rather than eliminating such initiatives, rebranding them under terms like “belonging”, “workplace culture” or “inclusion”, in a bid to avoid possible legal action.

ALONG WITH affirmative hiring practices, another big casualty of dropped DEI commitments is supplier diversity programmes, some of which date back to the civil rights movements of the 1960s.

As I discovered, big-hitters Google, Meta, Walmart and Amazon had been members of the Billion Dollar Roundtable, which has committed to spend at least $1 billion annually with minority- and woman-owned suppliers.

In 2023, its members spent a combined $123 billion with diverse suppliers and contractors, with an estimated economic impact of $321 billion. Hardest hit by the pullback will be Black female entrepreneurs, America’s fastest-growing demographic of small business owners, who face a loan-rejection rate three times higher than white business owners.

Catherine Early, meanwhile, spoke to supplier diversity leaders and advocacy groups in Europe to gauge how the rollback by U.S. multinational companies will affect local programmes across the pond.

It is in Africa, however, where the ramifications of the DEI retreat in the U.S. could be most serious.

As Ben Payton reports, activists in Africa are concerned that Trump’s inflammatory rhetoric, and his executive orders removing transgender rights, could embolden reactionary forces and worsen an already difficult situation for the lesbian, gay, bisexual and transgender community.

Only one African country allows same-sex marriage, while 31 countries criminalise same-sex sexual activity, often through colonial era laws. Uganda, notoriously, passed legislation in 2023 that mandates the death penalty for so-called “aggravated homosexuality”.

There is anxiety that progress on corporate DEI in South Africa will be rolled back, but activists also fear ramifications from Meta’s decision to water down its content moderation policies. One source told Ben: “A lot of the violence that we see in the region is technology-facilitated gender-based violence that affects not only women, but also LGBTI communities.”

THE ROLLBACK IN DIVERSITY and inclusion policies will inevitably have the greatest impact on women, who account for half the population, but on current rates of progress, will need to wait another 134 years to achieve parity with men, five generations beyond the Sustainable Development Goal target of 2030, according to the World Economic Forum’s annual gender gap report.

One country that may be more immune to DEI developments in the U.S. is China, due to high cultural barriers. As You Xiaoying reports, China’s female workforce of 351 million is the world’s largest, more than twice that of second-place India. And China surpasses both the UK and the U.S. with its female workforce participation rate of 60.5%.

But women, particularly at child-bearing ages, face challenges including widespread discrimination, with Chinese companies expecting employees to be fully devoted to their jobs.

Interestingly, the “tech bro” phenomenon holds less sway in China, with female founders at the helm of 41% of Chinese tech firms, and 39% of C-suite positions in these firms occupied by women.

If the global technology industry is a “young boys club”, the energy sector is an “old boys’ club” that is even more resistant to change.

As Angeli Mehta reports, women held fewer than 12% of leadership roles in 2021, compared with 15.5% in the non-energy firms. Among renewable energy firms, women were even scarcer, at 10.8%. Yet studies underline the importance of female leadership in driving the energy transition.

Angeli spoke to two prominent leaders in the clean-energy space, Inna Braverman of Israel’s Eco Wave Power and Lotte Rosenberg of Iceland’s Carbon Recycling International, about how they broke through, and how they are working to encourage other women to make waves in the energy sector.

One of the biggest barriers for female startups is the difficulty of accessing capital. One report from Boston Consulting Group found that while female-led startups generate over twice the revenue per dollar invested compared with those led by men, yet they receive only 2% of venture capital funding.

Dr Rand Gerges-Yammini, assistant professor in entrepreneurship at ESCP Paris, recently interviewed more than 100 female entrepreneurs and both men and women investors in an angel investment company to understand what is behind the huge funding disparity. In her comment piece, she explains that the biggest barriers lie with gender imbalance within VC firms rather than the prevailing narrative about shortcomings among female entrepreneurs.

Meanwhile, Dr Michelle Tessaro, co-author of The Female FTSE Board Report 2024, looks behind the headline figure that women now comprise 43.4% of FTSE 100 boards and 42.4% of FTSE 250. She explains that the number of women in executive director roles, as opposed to non-executive directorships, has stalled, with only 76 FTSE 350 companies having any female executive directors.

This isn’t only an issue for the UK. Only 52 companies in the S&P 500 and 25 in the Euronext 100 have female executive directors. In the U.S, the proportion of women in C-suite positions this year unexpectedly slipped to below 12%, a development that can be expected to worsen given President Trump’s “war on woke”.

She argues that equitable parental leave policies and affordable childcare policies are key to redressing the imbalance.

We end the issue with Oliver Balch’s interview with Mary Ellen Iskenderian, CEO of Women’s World Banking, who explains the importance of her mission to bring banking services to the nearly one billion women currently without them.

New digital technologies, particularly the spread of mobile phones, has opened up to women a world of possibilities that were unimaginable during the analogue age, she says, but these solutions will get nowhere if financial providers continue with social and cultural blind spots.

It’s a message that is perhaps applicable more broadly, to all areas of diversity and inclusion. Trump’s “war on woke” is not going to help in the short term, but might just spark a fightback, once some of the shock has worn off.

THE NEW TRUMP administration has taken a scorched earth approach to far more than corporate diversity and inclusion initiatives. Within hours of taking office Trump also announced a 90-day freeze on all U.S. foreign assistance. In the days since, the new Department of Government Efficiency (Doge) has proceeded to dismantle the U.S. Agency for International Development (USAID).

As Devex reported, 1,600 U.S. based USAID staff have now been cut, while direct hires around the world are on administrative leave.

More than $58 billion in funding planned this year has been affected, according to Pew Research Centre. The U.S. accounts for 40% of all humanitarian aid (though it spends less by percentage of national income than other G7 countries). Development agencies say the consequences if funding does not resume will be catastrophic.

Along with critical programmes that hundreds of millions of people depend on for health and food, USAID has poured billions of dollars into initiatives to mitigate and adapt to climate change, including nature based solutions.

This will have a huge knock-on effect for corporate partners in these projects, as for every $1 invested, USAID leverages $5 from private-sector partners, according to USAID's 2024 impact report.

I spoke to Eron Bloomgarden, executive director of Emergent, the non-profit that coordinates the LEAF Coalition, a public-private partnership that launched in 2021 with a goal of mobilising $1 billion to protect tropical forests.

LEAF has funding from the UK, U.S and Norwegian governments, along with numerous big corporates, which have pledged to buy high-integrity carbon credits. He said LEAF, which has signed deals with Costa Rica, Ghana, Ecuador and Para state in Brazil to supply credits, would not be affected, as the USAID contribution was relatively small.

But there will be many others whose funding will be at risk. To better understand what is at stake, download our December-January issue on financing nature

An analysis by Politico found dozens of instances where President Trump's executive orders closely aligned with Project 2025, the 900-page policy document by the right-leaning Heritage Foundation, which Trump as a candidate had sought to distance himself from because polls had shown it to be so unpopular.

The dire ramifications of the new administration's determined efforts to withdraw from climate action, beyond exiting the Paris Agreement, are slowly rippling out. CNN reported last week that U.S. government scientists working on the latest Intergovernmental Panel on Climate Change report have been told to stop their work, leaving a meeting of IPCC authors planned for this week in China in limbo.

“The IPCC is the backbone of global climate science,” said Harjeet Singh, founding director of Satat Sampada Climate Foundation.

“The decision to exclude U.S. scientists significantly .... risks compromising the process at a time when robust climate action is needed more than ever,” he told CNN in a statement.

Donna Lee is co-founder of carbon credit ratings platform Calyx Global, and was formerly a climate change negotiator in the State Department during President Obama's first term. In a comment piece for us, published on Reuters.com, she argues that as the U.S. steps back, more companies need to voluntarily take climate action, even though they will face "scrutiny, possibly even reprisals under a new Trump administration".

She adds that civil society and the media need to support those efforts. "There is a time and place to call out companies that are greenwashing. But we also need to praise those who are going above and beyond in their climate initiatives. This type of 'air cover' will be needed if we are to make progress during the second Trump era."

In an comment piece for us, Simon O'Connell, chief executive officer of Dutch development agency SNV, argues that given the crisis at USAID, carbon markets will now be needed more than ever to fill the gaping climate-finance gap. He urges the Integrity Council for the Voluntary Carbon Market to speed up a delayed decision on whether to approve methodologies for clean cookstove credits.

With 2.6 billion people globally still lacking access to clean cooking, further delays mean "not only that the carbon market may miss a crucial opportunity to finance cleaner cooking technologies, but also that it may lose the trust of buyers, who are increasingly cautious about inflated claims and low-quality credits."

Meanwhile, Eliot Whittington of Cambridge Institute for Sustainability Leadership, argues that the time for passive observation of what is happening in the U.S. is past. "We need a new plan - fast."

"We cannot allow the progress made on clean energy, sustainable finance and corporate accountability to be undone. We can’t allow opposition to action on climate and nature to go unchallenged."

While the climate movement faced a similar reckoning 15 years ago, when the Copenhagen summit collapsed. "We don’t have 15 years to get this right. The world in 2040 will be shaped by what we do now."

Trump is undoubtedly the biggest show in town, but developments in artificial intelligence have also come thick and fast over the past couple of months, with the UK unveiling its strategy to become an AI superpower, and the launch by China of DeepSeek.

In an analysis for Ethical Corporation, Angeli Mehta weighs up whether the UK will be able to harness AI to solve its growth problem without sinking its ambitions to lead on climate change. Meanwhile, Mike Scott, in his latest ESG Watch column reports at how DeepSeek has shone a spotlight on a host of new ESG risks as AI develops.

Most recently, Will Cavendish of Arup, in a comment piece for us, says the world is on the wrong track with developing AI, failing to seize opportunites to use the technology to make cities more sustainable and deliver decarbonisation at pace and scale.

"To do this we urgently need governments, big tech and financial institutions to focus much more on developing the type of AI systems that can help enhance our ability to tackle the prosperity, climate and nature crises. And at the same time create the national and international guardrails that ensure AI systems are developed safely and responsibly."

That's unfortunately all I have room to include in the newsletter. Thanks for reading.