The Strategic Business Case for Sustaining DEI in 2025

In an era marked by rapid demographic shifts and evolving regulatory landscapes, the strategic imperative of diversity, equity, and inclusion (DEI) has transcended corporate social responsibility to become a core component of risk management and value creation. For investors, the question is no longer whether DEI initiatives are worth pursuing but how their erosion could destabilize long-term returns. Catalyst's 2025 research underscores this reality, revealing that scaling back DEI efforts amplifies legal, financial, talent, and reputational risks while undermining performance metrics critical to competitive advantage.

Legal Risks: A Growing Liability

The legal implications of retreating from DEI are stark. According to a Catalyst survey of 2,500 U.S. employees, legal leaders, and executives, 83% of C-suite leaders and 88% of legal leaders view maintaining or expanding DEI as essential to mitigating legal riskRisks of retreat: The enduring inclusion imperative^[1]. This is not mere cautionary rhetoric: 65% of legal leaders and 68% of C-suite executives warn that reducing DEI efforts increases the likelihood of discrimination claims, particularly from marginalized groups such as women, people of color, and LGBTQIA+ employeesRisks of retreat: The enduring inclusion imperative^[1]. Recent court rulings, such as Students for Fair Admissions v. Harvard, have further complicated the legal terrain, making proactive DEI strategies a shield against litigation and regulatory scrutinyRisks of retreat: The enduring inclusion imperative^[1].

Financial Rewards: Linking Inclusion to Performance

The financial case for DEI is equally compelling. 77% of executives associate DEI with improved financial outcomes, while 81% believe it fosters stronger customer loyaltyRisks of retreat: The enduring inclusion imperative^[1]. Consumer behavior reinforces this: 69% of respondents are more likely to buy from companies that actively support DEI, especially among Gen Z and womenRisks of retreat: The enduring inclusion imperative^[1]. Conversely, over 1 in 3 consumers said they would abandon brands that eliminate or reduce DEI efforts, signaling a reputational and revenue risk for companies that prioritize short-term cost-cutting over inclusionRisks of retreat: The enduring inclusion imperative^[1].

Talent Retention: The Gen Z Imperative

The war for talent has intensified, and Gen Z—now a significant portion of the workforce—has made its priorities clear. 76% of employees say they are more likely to stay with a company that supports DEI, with Gen Z showing the highest commitment: 86% are more likely to remain, and 61% would never apply to a company without robust DEI programsRisks of retreat: The enduring inclusion imperative^[1]. For investors, this is a critical insight: companies that fail to align with the values of the next generation risk losing top talent to competitors, incurring recruitment costs, and stalling innovation.

Reputational Risks: The Perception Gap

Even as leaders rebrand DEI initiatives under terms like “employee engagement” or “workplace culture,” a growing perception gap threatens trust. 24% of employees believe DEI will become less embedded in workplaces, compared to just 12% of leadersRisks of retreat: The enduring inclusion imperative^[1]. This disconnect risks eroding employee morale and public trust, particularly as stakeholders demand transparency. For instance, KPMG's success in increasing women's representation in its C-suite from 22.2% in 2014 to 60% in 20232025 Catalyst Award Winners: Advancing Workplace Equity^[2] demonstrates how intentional DEI strategies can align leadership with employee expectations while driving measurable progress.

The Investment Imperative

For investors, the data is unequivocal: DEI is not a cost but a competitive necessity. Companies that sustain or expand DEI efforts are better positioned to navigate legal challenges, secure customer loyalty, retain talent, and build resilient brands. Conversely, those that scale back risk not only financial underperformance but also systemic vulnerabilities in an increasingly polarized and litigious environment.

As the 2025 Catalyst Award Winners illustrate, the most successful organizations are those that integrate DEI into their DNA, leveraging it to foster innovation, equity, and long-term value. In this context, DEI is not a peripheral concern but a central axis of strategic and financial health.