DEI in 2025: a binary choice?

At the start of 2024, we reflected on the landscape for diversity, equity and inclusion (DEI) for employers and the pace at which it was evolving, as businesses sought to develop meaningful strategies which reflected commercial objectives but also complied with applicable laws and met cultural and societal expectations (you can read our 2024 outlook here). Whilst many of our 2024 reflections remain live, arguments around DEI in 2025 have become more polarised in the public arena. 

Does this mean that businesses are faced with a simple binary choice whether to proceed with DEI initiatives at all costs or stop their DEI initiatives entirely? In this article, we suggest that the situation is more subtle and nuanced in light of global political developments.

The arguments to keep going

On one side, companies continue to face mounting pressure from investors, consumers and workforces to progress corporate DEI initiatives, with increased diversity reporting obligations, enhanced regulatory scrutiny, and continued expectation for performative displays of commitment. UK employers will also have a watchful eye to Labour’s plans for new diversity laws on the horizon (more on this below).

The arguments to retreat

On the other side, there is a growing backlash and emboldening of anti-DEI views developing in the US, resulting in a heightened environment for challenge, which is having ripple effects across the pond here in the UK and affecting the way in which some UK and global organisations develop or continue their corporate DEI initiatives. 

For some organisations, their location, workforce, and investors will dictate which arguments will win. For others, the DEI landscape feels more politicised and polarised than ever before. 

The changing discourse for taking action

It important to note that, at this stage, the legal position for employers taking action to improve the diversity, equity and inclusion of their workforces has not changed. But the discourse and appetite for corporate DEI has, and much of this influence comes from the US.  

Over four years ago, the murder of George Floyd triggered a wave of corporate commitments to DEI globally. But since the US Supreme Court decision in Students for Fair Admissions v Harvard and University of North Carolina in Summer 2023 and the current political landscape, some large US and global companies have publicly retreated from their corporate DEI pledges, including Ford, John Deere, Black & Decker, Boeing, Caterpillar. More recently in Autumn 2024, Walmart ended some of its DEI initiatives after a threat of conservative boycott ahead of the Black Friday shopping period and at the start of 2025, McDonald’s announced a shift away from some of its diversity initiatives. Whilst many organisations remain committed to their DEI objectives, this growing backlash and litigation from conservative groups in the US has influenced other UK and global corporations to pause, take stock and even retreat from their DEI initiatives. 

Positive action is still a grey area

At the start of 2024, we reflected on the challenges employers faced with taking positive action measures to improve DEI in light of the Students for Fair Admissions decision in the US. Our view remains that, whilst the legal position on positive action has not changed, the appetite for employers taking positive action measures has. 

However, employers should not feel bullied into retreating from their DEI commitments in light of a heightened risk of challenge. If anything, they should see it as a reminder that such action should always be in accordance with the existing legal framework, which requires any positive action measures to be proportionate and sufficiently tailored, evidence-based, illustrate a close fit between their means and their ends, and subject to review. 

Read more about positive action, what this means and how this works, in our guide. 

Legal change on the horizon 

Against this changing discourse, Labour’s new proposals for the UK are set to shake up the DEI landscape in a way unprecedented for over a decade, through upgrading existing rights and introducing brand new obligations on employers. 

Whilst further details of many of the proposals is awaited and it may be into 2026 / 2027 before such changes take effect, Labour are proposing to: 

• Mandate ethnicity pay gap reporting for businesses with 250 or more staff. This is in stark contrast to the former government’s position, which preferred a voluntary approach to such reporting. Whilst ethnicity pay gap reporting is expected to follow a similar reporting regime to the current gender pay gap reporting obligations, ethnicity reporting brings new challenges for employers to navigate, given the lack of binary categories for reporting. Designing a reliable reporting model which captures the identities and enables meaningful analysis into unjust racial disparities will be no mean feat for employers. 
• Mandate disability pay gap reporting for businesses with 250 or more staff. Whilst some businesses already voluntarily report on their ethnicity pay gap, reporting on disability pay gaps is noticeably less common. Difficulties with the collection of data remains a common theme, as many employees may choose not to disclose a disability due to concerns about discrimination, stigma or lack of awareness for what constitutes a disability. It is also not clear at this stage whether the definition of disability for reporting purposes will even align with the definition under the Equality Act and it remains to be seen what approach this will ultimately take. 
• Boosting gender pay gap reporting. Labour is bolstering the existing gender pay gap reporting obligations by requiring employers to develop, publish and implement action plans alongside its data, and include outsourced workers in their reporting. 
• Equal pay rights for ethnic minorities and disabled workers. Currently, pay disparities because of sex fall under equal pay laws. Labour proposes to increase the ambit of the existing equal pay regime by allowing claims based on ethnicity and disability (which would otherwise be challenged through discrimination claims). Labour has also indicated it will bring workers performing outsourced services within the regime by allowing them to compare their terms with permanent direct hires. 
• Dual discrimination. Labour intends to implement the dual discrimination provisions in the Equality Act 2010, allowing a direct discrimination claim to be brought on the basis of two protected characteristics, rather than just one as with the current position.

Many of these policies are bold and far-reaching. If and when enacted, they could spark a renewed wave of enthusiasm for DEI in the UK, in addition to increased resource and costs for employers. Grappling with new pay gap reporting obligations is likely to pose the biggest challenge to employers, however, it may be the wakeup call many organisations need to confront and address diversity pay disparities, particularly in light of the changing discourse for DEI in other parts of the business world. 

With so much change on the horizon for employment law across the board, you can keep track with our Employment Law Reforms Tracker. 

Conflicting beliefs in the workplace: a mainstay of corporate life 

In 2024, we saw an increase in conflicting beliefs arise in the workplace across a myriad of issues from religion, geopolitical events and gender critical beliefs. 

Conflicting beliefs in the workplace are, to some degree, an inevitable part of modern working life, as many organisations have multi-generational workforces comprising different cultures, religions and beliefs. In an environment where employers must respect the rights of individuals to hold and express their views – providing they do not discriminate or harass others – and where such views are capable of amounting to a protected belief under the UK Equality Act 2010, many employers have to navigate the tightrope of promoting policies of zero tolerance of discrimination and harassment, while also encouraging colleagues to bring their authentic selves to work.

But managing conflicting beliefs appropriately and lawfully is tricky. Employers need to remain tolerant to views they may not agree with or even find offensive, have mutual respect for different beliefs, and need to approach different beliefs even-handedly. Such conflicts can become contentious and impact employee engagement, productivity and morale. When they are not managed carefully, they can also escalate and create significant legal and reputational risk even for the most well-intentioned employer and have harmful and long-lasting effects on workplace culture. 

If conflicts are going to be a mainstay of corporate life, it is important that employers equip themselves with the learning and skillset required to manage these conflicts effectively in order to mitigate risk and create a workplace culture which fosters tolerance, even handedness and respect for different beliefs. 

Regulatory scrutiny 

In 2023 and 2024 we saw increased regulatory focus on diversity and inclusion as the UK financial services regulators published consultation papers proposing changes to boost D&I across the sector and marking one of the biggest attempts by a regulator to shift the dial on D&I we had seen. We had expected this to continue into 2024 and beyond, but shortly before the UK’s general election in the Summer, the FCA quietly confirmed that its D&I proposals would be put on ice (read our blog post about this here).

Whilst we had understood the regulators were committed and even steadfast in their intention to boost D&I across the sector, with hindsight, a pause is a sensible move considering wider societal and geopolitical events and Labour’s proposals (as outlined above), which have the potential to cut across the regulatory proposals and risk creating a dual reporting regime and additional red tape for employers. 

We understand the financial services regulators intend to set out next steps for D&I for the sector in Q2 2025 and in the meantime, they are exploring ways in which diversity and inclusion reporting might be simplified and more joined up – which we welcome and eagerly anticipate!

Sexual harassment taking the spotlight 

In October 2024, the hotly anticipated mandatory duty on employers to take reasonable steps to prevent sexual harassment of their employees came into force (read more about the new duty here), shifting the focus from a historically reactive approach to instances of sexual harassment in the workplace, to a more proactive approach of identifying risks of sexual harassment and requirements to mitigate those risks. 

The new duty, which requires employers to take reasonable steps to prevent sexual harassment occurring, has also given a new focus to corporate DEI initiatives and workforce training and education, as many employers look to roll out mandatory training for staff on working respectfully and preventing sexual harassment. 

However, the duty is ongoing and requires employers to take a proactive approach to tackling cultural standards across their organisation by anticipating risks that might exist and how best to respond to these. Employers should refrain from seeing this solely as a compliance exercise, but  embrace this as an opportunity to consider their business in context and cultivate a respectful and inclusive workplace culture. 

See our guide for more detailed guidance on the duty and what this means for DEI strategies for 2025.

2025: a calm before the storm?

Whilst 2025 might seem to be a quieter year for DEI in light of the changing discourse and whilst we await Labour’s legislative changes, it could be the calm before the storm as DEI will be centre stage for many cultural agendas in the coming years. Employers should use 2025 to take stock, reconsider, and plan accordingly and use the time to: 

• Look at their diversity data: what do they collate? Where are the gaps? What does the data tell them? What do they need to do in order to be ready for Labour’s new reporting proposals? 
• Assess and reconsider their diversity objectives: are these right for the business considering the current DEI landscape and societal expectations? What areas are missing? Are the objectives even-handed across different groups and focus areas?
• Review existing positive action measures. Do these meet the requirements set out in the legal framework? What more can be done? Where do changes need to be made to mitigate legal risk or challenge?
• Carefully assess the risks if they are considering retreating or withdrawing from any DEI commitments. Not only are there legal risks to consider, but wider implications for workplace culture. 
• Consider if managers are equipped with the skillset to manage conflicting beliefs in the workplace. Do policies and procedures reflect management’s expectations for standards of conduct and behaviour and how beliefs should or should not be manifested in the workplace? Do employees fully understand what is, and is not, acceptable standards of conduct in this regard?
• Consider where further training and education is needed. Not just on DEI generally, but on targeted areas for the business, from working respectfully with others, to sexual harassment. 

The Linklaters Diversity Faculty is a specialised practice advising businesses on the legal, regulatory and governance aspects of DEI. If you would like to discuss any of these issues further, please do get in touch.