Does DEI make cents?
Retail giant Target has suffered financially both going and coming over the last five years of the culture wars around diversity, equity and inclusion.
In 2020, after George Floyd was murdered by police in Minneapolis—home of Target headquarters—it developed a three-year plan to increase the number of Black employees by 20%.
“We know that having a diverse workforce and inclusive environment not only creates a stronger team,” Melissa Kremer, Target’s chief human resource officer, said in a 2020 statement, “but also provides the perspectives we need to create the products, services, experiences and messages our guests expect.”
The company’s 2,000 stores include 400,000 employees, half of whom are people of color and 60% women. Between 2015 and 2020 it doubled the number of non-White officers. Its Board of Directors are half Black or Latino and one-third are women. More than half its stores are run by women.
In 2023, upon releasing Pride Month products, Target faced a right-wing boycott, then a left-wing one for removing them from store shelves. Its second quarter 2023 sales dropped for the first time in six years.
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But it didn’t end there. On Jan. 31, the company was hit with an investor-led lawsuit alleging the company did not disclose risks of its DEI initiatives.
In January 2025 it said it would quit its DEI goals and initiatives, evaluate partnerships to ensure they are “directly connected to our roadmap for growth” and no longer participate in third-party DEI and LGBTQ+ scorecards. It is changing the name of its “Supplier Diversity” team to “Supplier Engagement” and focusing on small businesses.
Its statement noted these changes have “the goal of driving growth and staying in step with the evolving external landscape.”
The woke/broke calculus
DEI initiatives were originally seen as a way of making common cause with the community and within the business ranks. But one overlooked aspect is that it’s also good for business.
McKinsey’s 2023 report on 1,265 companies in 23 countries found companies in the top quarter with female and ethnic diversity executive team representation nancially outperformed those at the bottom quarter by 39%.
A global study by UN Women in 2024 showed inclusive ads boost short-term sales by 3.5% and long-term sales by 16% while also increasing shopper loyalty by 15%.
The question is, in the 2025 culture war quest to dismantle DEI, are businesses throwing pro ts out with the bathwater?
“Productivity and profitability improvements are diffucult to directly link to diversity and inclusion, but there is a logical arc from DEI to retention, engagement, culture and wellbeing,” Diana Scott, leader of The Conference Board’s DEI consultancy division, told Drug Store News. “DEI done well improves productivity. It improves business outcomes.”
That could mean on-the-floor staffers who look like the community in which they serve. And also at the leadership level, where a company’s ability to thrive depends on a team’s diversity of looks and life experiences that provide a broader base of options for consideration, thus improving resilience and adaptability en route to better profits.
“We believe we can’t do effective work unless our team is just as diverse as the audiences we talk to,” said Kyle Monson, founder of the Codeword ad agency, who follows research on the diversity/profitability nexus.
“This war on diversity, equity and inclusion is disingenuous nonsense. It’s bad for business.”
Is it possible that the financial case of DEI has not been communicated as clearly as it could be?
Retailer responses to the culture wars
Costco, at its Jan. 16 board meeting, turned back a proposal that would require the company to report on any potential risks to profits from diversity programs. Fully 98% of shareholders voted no.
Costco argued that DEI programs are, in fact, good for profits. And not just because the staff reflects the customers and communities in which stores operate. Inclusion means employees feel like they belong in a company culture and that leads to less turnover—always an expensive proposition for businesses. Costco’s DEI initiatives, announced its board, “enhance our capacity to attract and retain employees who will help our business succeed.”
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The Costco share price over the last year was up 36%, far outpacing the S&P 500’s 26% gains.
Conversely, a 2022 study from a Cornell University researcher who has investigated business practices such as environmental social and governance (ESG) as well as DEI found that, by one DEI scorecard measure, there is no signi cant positive correlation to its financial performance from an investment perspective.
Walmart, which employs 1.6 million employees, said its 2025 changes walking back its commitments to DEI, including changing DEI in job titles to “belonging,” were not coming from a place of profits.
“Every decision comes from a place of wanting to foster a sense of belonging,” the company said in a statement, “to open doors to opportunities for all our associates, customers and suppliers and to be a Walmart for everyone.”
Wall Street goes bearish on DEI
From the heart of the financial industry, the political winds of 2025 have certainly upended business behavior.
Five years ago, Goldman Sachs CEO David Solomon announced the company’s DEI policy: the investment bank would not help companies go public unless they have at least one diverse board candidate, “with a focus on women,” starting in July 2020.
Solomon said DEI is good for business, noting that U.S. companies with at least one woman on their board outperformed those without women with “premium returns” between 2016 and 2020.
Corporations disclosing DEI metrics tied to executive compensation rose from 52% of S&P 500 companies in 2021 to 75% in 2023, according to the Conference Board, a century-old business best-practices nonprofit. Russell 3000 companies similarly grew, from 29% in 2021 to 49% in 2023. But in a bellwether 2023 decision, the U.S. Supreme Court outlawed affirmative action in colleges. This emboldened activists to attack race-conscious initiatives in the business community.
The Conference Board reported S&P companies’ DEI metrics in 2024 declined to 67%, while Russell in 2024 dropped to 41%. And then Donald Trump was elected president, and began his term with an aggressive attack on DEI in the federal government and also in the private sector.
In early 2025 the Nasdaq stock exchange announced a rule change rolling back its requirement that companies listed on the exchange provide various DEI disclosures.
On Feb 11, Goldman Sachs rolled back its DEI requirement for IPO companies.
“As a result of legal developments related to board diversity requirements, we ended our formal board diversity policy,” Goldman spokesperson Tony Fratto said. “We continue to believe that successful boards benefit from diverse backgrounds and perspectives, and we will encourage them to take this approach.”
Beauty for all
Beauty brands have not had the same hand-wringing over diversity, likely because beauty is the great uni er. L’Oreal alone has teams around the world that comprise 168 nationalities.
In 2024, beauty retailer Sephora won the Forbes Best Employer for Diversity award. In the past two years it has doubled its number of Black leaders. Its diversity POV includes people of color, women, people with disabilities, LGBTQ+, working parents, millennials and people over the age of 50.
L’Oreal’s long-held diversity bona des also gather in gender equality, which include its work in Australia with The Father Hood that provides parental leave and “helps women return to the workforce more easily.”
“While there may be new resistance in our country around equality programming,” said Artemis Patrick, president and CEO of Sephora North America, “our commitment remains stronger than ever.”
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In a Jan. 25 earnings call, LVMH chairman and CEO Bernard Arnault noted that since LVMH acquired Sephora in 1998, the beauty retailer’s revenues have gone up more than 10x, from EUR 100 million to more than a billion. “We stuck to our commitments in terms of diversity,” said Arnault, “Sephora reported exceptional growth.”
Also emblematic of the beauty category’s immunity to DEI threats, Ulta Beauty in late 2022 partnered with transgender in uencer Dylan Mulvaney—the same celeb who teamed with Bud Lite, which suffered a boycott leading to a 27% drop in sales and toppling it off its throne as top beer in America. Ulta Beauty, also targeted by boycotts, suffered no such decline.
The push and pull over DEI have reached a new phase with the Trump administration’s DEI dismantling efforts. Everyone is reading the room, but some companies are dismantling DEI entirely while others are making semantic changes like changing “diversity” to “belonging.” And still others, particularly brands that had some semblance of DEI policies long pre-dating the 2020s’ DEI culture wars, have maintained their heading—along with their profits.
