The future for DEI and ESG: removal, reform or values-based revolution?

Blog posts

14 Apr 2025

Dr Duncan Brown, Principal Associate

Follow @duncanbHR

My colleague Jonny Gifford’s excellent recent blog expressed the frustration, nay moral outrage, that many of us in HR research and practice felt at the attacks initiated by President Trump’s administration on ‘wokeism’ and employers’ diversity, equality and inclusion (DEI) and wider environmental, social and governance (ESG) initiatives. Elon Musk’s infamous tweet that ‘DEI must DIE’ is apparently now underpinning US government policy.

But even more so, there’s widespread anger at the apparently spineless retreats of major employers such as Accenture, Disney, Uber, Amazon and Microsoft in ‘sunsetting’ their diversity programmes. And as Jonny points out, their underpinning values, proving to be ‘fair-weather friends’ to their social and equality goals. With a couple of months now to reflect, I wanted to put these developments into their wider context, both internationally and in terms of the climate change agenda.

My earlier IES paper on ESG and HR found mutual benefits for employers and governments of these expanding, interacting agendas. Preparing IES research input for a session at the European HR Directors’ Circle annual conference on HR’s contribution to ESG, with a particular focus on climate and energy transition, leads me to conclude, like Jonny, that we shouldn’t despair at current events. Rather, as he says, ‘stand firm’ and refocus on reformed, more impactful initiatives.

The retreat

Thinking about my Generation ‘Y’ daughters setting out in their careers, I am not sure whether I am more concerned about these DEI retreats (despite the funereally slow rate of progress on gender equality); or the disastrous future they face due to climate change. 2024 was the warmest on record according to the World Meteorological Organisation, with a global average temperature up 1.55 degrees, already above the UN’s goal of 1.5 set in 2015 in Paris. The number of UK wildfires tripled last year.

You wouldn’t sense the impending global inferno from recent government and corporate actions in the US. The number of S&P 500 companies mentioning DEI in their annual reports has plummeted by 60%. In January nine State Attorney Generals warned six large financial firms of legal action over the negative impact of their diversity and climate investment policies in raising energy prices; while a judge in Texas ruled American Airlines violated federal law by considering environmental factors when managing its employee pension plan.

As a trustee of the CIPD’s pension plan our ESG investments are well-supported by our members. But fewer than half of investors last year took account of ESG considerations according to the Association of investment Companies. More than half of UK businesses have deprioritised green practices in the last year according to research quoted in City AM. BP, for example, just disbanded its low carbon team in its latest retreat from a five-year old diversification strategy. Staff were reportedly told ‘we need to revert to the old BP – more oil and gas’.

If their pay plan designs indicate what’s on executives’ minds in the Trump/anti-woke era, the use of ESG and DEI targets in their incentives appears to have peaked, with reversals evident in recent months. HSBC for example dropped a sustainability measure from its annual executive bonus plan.

As I sit drinking their coffee writing this, Starbucks’ latest proxy statement says it will remove a greenhouse gas emission reduction target from its long-term incentive plan next year, as well as a DEI metric. BT is similarly dropping DEI representation targets from the annual bonus of 37,000 managers, despite decidedly mixed progress towards achieving them.

So, what are my grounds for optimism? I would highlight three factors.

Reform

First, the reaction against DEI/ESG is much stronger in the US than the UK and Europe. While ESG fund launches did fall by 10% in Europe in 2023, they were down 75% in the US.

My old colleague Andrew Page, executive pay leader at PwC, sees a clear ‘bifurcation’ now in incentive plan designs: ‘If you are a big globally diversified company..it’s likely you’re hearing a conflicting message.’

Maintaining apparently contradictory policies on either side of the Atlantic might appear to be an uncomfortable balancing act for multinationals. But it is perhaps only an extreme example of the tailored, ‘think global, act local’ approach and avoiding the ‘one-size-fits-all’ strategy. 

Refocusing rather than removal

The Institute of Director’s latest member survey found 71% of CEOs making ‘no change’ to their approach to diversity. 4% plan to scale up DEI activities. But many referenced changes, such as being less public in promoting them.

CIPD’s CEO Peter Cheese made a powerful defence of DEI in a recent statement. But secondly, he recognised the external attacks ‘make this a time and opportunity to reflect on progress’, and the ‘evidence for DEI initiatives, emphasising relevance, actionability, and outcomes’. Which hasn’t always been the focus of HR departments in the past, in their rush to keep up with the latest diversity fads. IES has regularly highlighted the lack of evidence-based action in HR and DEI policies, for example with the research on our gender pay gap resource hub.

IES research highlights the need for more tailored and impactful programmes, including more direct, sometimes difficult initiatives, such as: anonymised recruitment processes and salary history discussion bans successfully implemented by a number of our clients; and targeted support for female senior lecturers to apply for promotions to professor in a university.

The latest review of the use of ESG criteria in executive incentives shows companies refocusing these plans, often with fewer targets and better alignment with international standards such as the Global Reporting Initiative, so as to achieve greater quality, consistency and transparency. This broader, more modest approach seems to be increasingly evident in ESG initiatives.

Reasserting values

Retreat, reform or both? The jury remains out. But we can all influence these outcomes, as HR professionals, voting citizens and consumers.

What’s really cheered me up and made me optimistic is those ‘standing firm’ and reasserting their values. London-based international law firm Simmons & Simmons, which has a substantial US equities advisory business, proclaims on its website:

‘As a responsible business, we’re guided by our purpose… we strive to create positive impact and outcomes for our clients, our people, society and the world around us’.

Easy to say, tougher to deliver in the current climate? No sign of that. At the end of February the firm delightfully chose New York to announce the expansion of its already-demanding representation targets to encompass social mobility. Senior Partner Julian Taylor commented:

‘A career in law should not be determined by background … These ambitious social mobility targets will ensure that we go further and faster in our efforts to widen access and opportunities.’

He recognises there are many clients, potential clients, employees and recruits out there who also fundamentally disagree with what’s happing in North America: let’s get that push-back against the push-back on DEI and ESG really moving now!

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Any views expressed are those of the author and not necessarily those of the Institute as a whole.