Multinationals take ‘regionalised’ approach to US EDI retreat

The Financial Times is reporting that multinational companies are increasingly being forced to rethink how they approach diversity and inclusion, as political pressure in the United States drives a rollback of EDI initiatives. 

In its article “Trump’s diversity retreat leaves European companies walking a tightrope,” the FT describes how businesses operating on both sides of the Atlantic are now navigating sharply different expectations, with EDI coming under sustained political attack in the US, while legal and regulatory obligations in the UK and Europe remain firmly in place. So, should UK businesses be following the direction of travel in the US, or does the very different legal framework in the UK mean that retreating from EDI could actually increase risk rather than reduce it? And for multinational employers in particular, how do you reconcile US political pressure with European legal obligations, without undermining either compliance or credibility? We’ll put those questions to diversity expert Kate Dodd.

As you may have noticed, the EDI debate in the US is unfolding against a very different legal backdrop. In the United States, much of the current backlash has focused on affirmative action, something we don’t have in the UK. Here, the framework has always been more limited and more carefully defined, centred on lawful positive action rather than quotas or preferential treatment.

That distinction matters, because it raises a question about whether the drivers behind the US rollback are even transferable to the UK, or whether they are being misread when viewed from this side of the Atlantic. In the US, much of the change has been political, reflecting shifts in enforcement priorities and interpretation, which prompts a further question about how far that should influence UK decision-making.

There’s also the regulatory picture. UK regulators have not indicated any wholesale retreat from expectations around equality, inclusion, and harassment prevention. While there have been adjustments to some targets and timetables, the underlying expectations remain in place. For employers, multinationals especially, that raises a practical issue. What does it really mean to scale back activity that was originally designed to meet those requirements, and what legal risks might that give rise to?

Against that backdrop, many businesses are now adapting, becoming more cautious about language and public positioning in the US, while continuing to maintain programmes and commitments in the UK and Europe. It’s a legal and strategic balancing act and its one that diversity expert Kate Dodd has been helping a number of her clients to get right. 

So let’s hear from Kate. First question, so why shouldn’t UK employers mirror the EDI roll back we’re seeing in the US?

Kate Dodd: “I suppose there are four main reasons why. The first is what we're seeing, really, is that this retreat in the US, which has obviously been kicked off over a year ago now, has really been based on the legal framework that operates in the US, which is very different to the legal framework that operates in the UK and across Europe. We have never had affirmative action and it's affirmative action, in particular, that has really been the root of the criticism and the root of the rollback in the USA whereas we've never had that. We've only ever had positive action here, and that is much more limited and would most likely be considered lawful in the US, as well as in the UK. So the first reason is a legal one which is that everything that you are required to do here, or everything that employees are doing here, is because they are required to do it due to the legal framework. The change in the US is actually mainly political. There hasn't really been any real legal change in the US, it has been a political change as to how the law is interpreted and how things have been allowed to take place. Secondly is the fact that the regulators in the UK continue to require UK businesses to do all of the work that they have been doing. So it's not that anything has changed from a regulation perspective. There have been some changes, or some delays in some of the targets etcetera, that are put in place by some of the regulators, but there hasn't been a wholesale change in what regulators require. Thirdly, is the fact that there is the reasonable steps defence. That is something that is available to employers in the UK if an act of harassment, for example, is alleged. They have to show that they've taken all reasonable steps to avoid that harassment and you can only do that if you have indeed taken those steps. So doing the types of EDI work, EDI programmes etcetera, the training, that's exactly what will form the pivotal part of your reasonable steps defence. Then finally is the reputational impact. This has had a huge impact on the reputation of US businesses. What we have heard, about and what has been widely reported, has been the rollback. What, interestingly, we haven't heard so much about has been the pushback, the reaction against that that's happened in the US. Talking to our colleagues in the US and other lawyers, really interestingly, there has been a huge amount of action that has been happening in the US against the anti-EDI measures that are being seen, not talked about as often, but really having a huge impact on the reputations of those businesses that are seen to be going too far, the reputation of those businesses who are seen to not be trying to take a stance against some of the things that are being removed, and that having a real impact not only on employee satisfaction, but also on shareholders, potential employees, etcetera. So a real reputational impact.”

Joe Glavina: “Have you noticed multinational companies adopting ‘regionalised’ EDI strategies, Kate? So adapting EDI language and structures for US operations while retaining full programmes in the UK and EU?”

Kate Dodd: “Yes, so there is most definitely a segmenting, or a regionalisation, of EDI strategies. Absolutely necessary for businesses who are facing into the US, particularly those who are vulnerable to losing work. Nobody's suggesting for a minute that many businesses have any choice in this, because actually they don't – to continue to operate in the US, for lots of them this is absolutely essential. But what we're seeing is they are continuing to do much of what they're already doing, but regionalising their strategies so that, for example, they're very careful about what's on their internet, they're very careful about the language that they are using, and they're really walking a bit of a tightrope, if I'm being honest, in terms of making sure that they're continuing to meet their promises and their targets and their action plans whilst also remaining compliant in each of those jurisdictions. And it's worth saying, again, that Europe is not changing in terms of it's certainly not rowing back on the types of commitments that could be broadly seen as being in the EDI bucket. In fact, they're getting stronger. So we're seeing much stronger anti-harassment provisions coming in across Europe. We're seeing much more requirements around gender pay gap reporting, for example. So Europe is moving in one direction, the US has moved in the other direction and therefore what we're seeing is companies who are really maintaining their global commitment overall, whilst making sure that they have compartmentalised, or regionalised, their strategy to ensure that they are legally compliant in the US, and that they are compliant with the Trump administration and the requirements that are being put upon them there.”

Clearly, this is a tricky balance for businesses operating across the UK, Europe and the US and Kate and her team are currently working with a number of clients to help them with that exercise. If this is an issue you’re facing and you’d like help, please do contact Kate – her details on the screen for you.