Scaling Back DEI Poses Major Risks, New Study Finds

A new national study warns that reducing diversity, equity and inclusion (DEI) efforts could significantly increase corporate risk—including legal exposure, talent loss, financial setbacks and reputational damage.

According to the CATALYST, the report, titled Risks of Retreat: The Enduring Inclusion Imperative, was published by Catalyst and NYU School of Law’s Meltzer Center for Diversity, Inclusion, and Belonging. It is the largest U.S. workplace inclusion study released since recent legal and political challenges to DEI, surveying 2,500 executives, employees and legal leaders from companies with active inclusion programs.

“Inclusion has never been a liability — it’s a competitive advantage and a business imperative,” said Jennifer McCollum, president and CEO of Catalyst. “The data show that companies committed to fairness and opportunity are better positioned to retain talent and outperform competitors.”

According to the report, 76% of employees are more likely to stay with companies that support DEI. That figure rises to 86% for Gen Z workers, and 61% say they would not apply to companies that don’t prioritize inclusion. C-suite leaders overwhelmingly (84%) see a strong link between DEI efforts and talent attraction.

Financial benefits also remain clear. Most top executives say DEI correlates with stronger financial performance (77%) and increased customer loyalty (81%). Consumers agree—69% say they are more likely to support brands with visible DEI commitments, rising to 78% among Gen Z.

Legal experts caution that retreating from DEI could actually increase liability. Some 88% of legal leaders say retaining or expanding DEI programs is essential for mitigating legal risk. A majority believe pulling back may lead to more lawsuits, particularly involving discrimination claims by women, people of color and LGBTQIA+ employees.

Even rebranding DEI without transparency can erode trust. While 78% of executives say they’re renaming initiatives under terms like “belonging” or “fairness,” fewer employees believe their companies are staying the course. Nearly one in four employees predict a retreat in DEI over the next five years.

“Opting out of DEI isn’t neutral—it has consequences,” said Christina Joseph of the Meltzer Center. “This research shows that inclusion is more than a moral choice. It’s a strategic one.”