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As more companies scrap or pare back DEI pledges and goals related to hiring and supplier diversity, from Amazon to Target and Meta, corporate philanthropic activities are also ripe for review.
Companies routinely support DEI initiatives through foundations or other corporate giving programs. According to a new survey by The Conference Board, changes among corporate philanthropy leaders are already underway to reflect the new political reality and intense focus from the Trump administration on DEI practices within both the government and business world.
More corporate charity arms plan to ramp up company efforts around economic opportunity and education. Simultaneously, they foresee scaling back initiatives around racial and gender equality, which became a larger focus in recent years and in particular after the murder of George Floyd. JPMorgan Chase, for example, launched a $30 billion racial equity program that involved its charitable giving programs, among many other parts of the bank.
Corporates are free to fund who they want, as long as it’s not illegal, but they are under pressure, said Andrew Jones, author of the report and senior ESG researcher at The Conference Board. “None of them wants to be the one attacked by the federal government” or activists or others, he said. “That’s a major source of reputational risk to companies.”
There are many ways that companies’ philanthropic efforts could be impacted by recent political and legal developments, and the conversations are starting to take place, even though companies’ philanthropic practices haven’t been the main area of focus in the wake of President Trump’s executive orders relating to the private sector’s DEI initiatives.
“Companies are still, by and large, playing catch up and getting their arms around” how the orders apply to their core business, and “the steps they need to take, if any, to modify historical business practices,” said Michael R. Littenberg, a partner at law firm Ropes & Gray, and global head of the firm’s ESG, corporate social responsibility and business and human rights compliance practice.
However, companies have started to expand their thinking into the potential impacts on corporate giving and philanthropic efforts. Companies are asking, “how can we succeed without being sued?” said Christen Graham, founder and president of Giving Strong, a consulting firm that advises corporations, foundations and nonprofits on corporate social responsibility and philanthropy.
Companies need to tread carefully. Many legal challenges to DEI-related policies have been brought in the wake of the U.S. Supreme Court’s landmark ruling in 2023 that affirmative action in college admissions is unconstitutional, and the scrutiny is intensifying with executive orders from the new Trump administration targeting DEI.
Last year, the American Alliance for Equal Rights, headed by conservative activist Edward Blum, sued Fearless Fund, which invests in under-resourced entrepreneurs including women of color-led businesses. At issue was a particular grant contest that awarded grants to Black women-owned small businesses, which American Alliance claimed was a violation of federal civil rights law. The parties settled the case in September with Fearless agreeing to permanently close the grant program.
In January, American Alliance sued McDonald’s, alleging that its HACER National Scholarship Program unlawfully excluded non-Hispanic applicants because of a requirement that applicants for the scholarship have at least one parent of Hispanic/Latino heritage.
McDonald’s disagreed, but said settling was in the best interest of scholarship applicants. The company said it would remove the offending criteria and instead ask applicants to demonstrate their impact and contribution to the Hispanic/Latino community through their activities, leadership and service.
McDonald’s is among the many corporations to have significantly scaled back major DEI program goals.
Where corporate giving may go
Questions about future policies abound. “You’ve got a lot of companies and non-profit organizations and universities who are worried about their commitments to diversity and what that commitment can look like in this new world,” said Danielle Conley, who leads the anti-discrimination and civil rights practice group at law firm Latham & Watkins.
If a foundation has a grant application process that is racially exclusive, it’s ripe for challenge, she said. This may be different from corporate gifts made to organizations, depending on the circumstances, but there are a lot of uncertainties that will likely be fleshed out in the coming years. “Each company or organization has to do an in-depth evaluation” of its policies, practices and programs, she said.
Companies also need to assess their risk tolerance. More risk-averse companies may decide to pull back on certain giving activities in light of the uncertainty, including some things that are legal under today’s standards, she said.
Many companies remain committed to DEI initiatives.
A January survey by The Association of Corporate Citizenship Professionals found that 89% of respondents plan to stay on track or increase their corporate social responsibility commitments, said Andrea Wood, chief executive of the membership organization focused on advancing corporate social impact.
A majority of social impact work focuses on low-income communities and companies understand there’s a strong business imperative to do so, Wood said. “Companies are not going to walk away from that.”
Jamie Dimon, chairman and chief executive of JPMorgan Chase recently reiterated the firm’s commitment to DEI in an interview with CNBC from Davos. “We are going to continue to reach out to the Black community, Hispanic community, the LGBT community, the veterans community…” he said in the interview, noting that if the company was told it was doing something wrong it would “make modifications” to its policies. He noted that the company is “very proud” of the work it has done to “lift up cities, schools, states, hospitals, countries, companies, and we’re going to do more of the same.”
Companies that firmly believe in DEI will find ways, if necessary, to reshape their philanthropic goals such that their objectives are met without running into legal trouble, said F. Warren McFarlan, Albert H. Gordon Professor of Business Administration Emeritus at Harvard Business School. Nobody’s talking about not giving charity to the poor, he said. But targeting efforts to certain zip codes, instead of explicitly focusing on race or ethnicity can accomplish a company’s goals without causing legal concerns, he said.
Organizations have to walk a fine line because research suggests that younger talent cares deeply about working for companies that care about environmental and socio-economic issues. “Companies have to attract the next generation coming in, and if you’re seen as out of line [with their values] you don’t necessarily attract the kind of people you want,” McFarlan said.
Revising the language companies use to describe philanthropic efforts, as has been done with DEI — there is much more talk about inclusion now than diversity — may occur within companies that remain committed to their non-profit partners, with tweaks to how they describe their efforts. Over one-third (37%) of executives say they are revising the language and terminology used to describe their initiatives, both internally and externally, according to The Conference Board data.
Instead of phrases related to racial, social or environmental justice, there is more likely to be language on environmental or community resilience, as well as belonging and inclusion and economic opportunity. “It’s trying to be a bit less controversial. Still doing the same work, but doing it in a less polarizing way,” Jones said.
Companies said they are making these changes primarily in response to political, social and legal developments and to minimize backlash, according to The Conference Board.
For employees at big companies, a lot of this work will go on behind the scenes and remain invisible to the rank-and-file. However, one way in which all employees may experience these changes is through corporate charitable donation matching programs. The chilling effect of the government’s pushback on DEI could also start to impact on companies’ that currently match employee donations to charities, some industry participants said.
Companies have varying approaches, with some more restrictive on what’s an acceptable match. Graham of Giving Strong said she expects some companies will change their matching policies, or, at the very least review them, in the wake of greater scrutiny. “Everything is under review right now when it comes to discretionary funds,” she said.