• by Sarah Mahoney  @mahoney_sarah, August 27, 2024

Lowe’s is the latest retailer to land in the glare of anti-DEI activism, and a leading “anti-woke” activist is claiming victory. But observers say that a closer look at this and other corporate responses may point to a decidedly more calculated way to handle social media bullies, whether conservative or liberal.

The latest skirmish in the corporate culture wars comes from the X account of activist Robby Starbuck. He claims Lowe’s has told him it is altering some DEI policies, and will no longer make donations to Pride events. It also said it is ending Lowe’s Employee Resource Groups to form one significant ERG.

“We’re now forcing multi-billion-dollar organizations to change their policies,” Starbuck says in his post. “We are winning, and one by one, we will bring sanity back to corporate America.”

Starbuck has already chalked up similar DEI rollbacks at Tractor Supply, John Deere and Harley Davidson in his “win” column. What these companies have in common is a consumer base that is predominantly white, male and conservative. They’re also all struggling, facing declining sales. A few tweaks to internal policies may seem like a small price to pay to quiet critics down.

“A significant proportion of consumers don't care either way,” says Jaime Katz, an analyst who covers the retail sector for Morningstar, who points out that “rollback” is often too strong a word. “Whether they see DEI as part of the problem or part of the solution, there’s a general feeling of indifference.”

Lowe’s has not publicly commented on any changes or responded to media inquiries. Katz says Lowe’s seems to be looking “for the balance that will appease both parties so that they don't alienate either their workforce or the noisemakers outside of the organization.”

She points out there is a big difference between a company saying it will “prune back on things, like not sponsoring a Pride parade, but that doesn’t mean they’re taking it all off the table,” she tells Marketing Daily. “Creating a single ERG group is very different than eliminating them.”

Such moves may be the quickest way to shoo away social-media gadflies like Starbuck. “It’s easier just to say something to make it go away than to let this guy continue to opine like this. He’ll just move on to the next company.”

Other experts disagree, and say companies are likely to suffer as a result. “Many firms, including Lowe’s, are taking a short-sighted approach to DEI,” says Traci Sitzmann, a professor of management at the University of Colorado in Denver. “They are retracting their DEI initiatives in response to backlash, without realizing the price that is paid for the retraction.”

Sitzmann, whose research on the impact of DEI efforts on workforces has appeared in the Harvard Business Review, points out that most U.S. employees support DEI. “By disenfranchising a large segment of the workforce, Lowe’s, Harley Davidson, John Deere, and other major corporations will pay a severe price long-term,” she tells Marketing Daily in an email. “Employees are unwilling to give their full potential to employers that do not value them and their colleagues. Without an investment of human capital by employees, a corporation is unable to function effectively, serve a diverse client base, innovate, and solve problems.”

Indeed, she adds, a company’s value creation -- or its loss of value -- “is fundamentally driven by internal operations.”

It’s not that DEI efforts are especially effective. Despite widespread adoption, the majority of corporate management positions are still held by white men. While some components, including hiring a chief diversity officer and establishing diversity task forces, make a difference, others have a negative effect, Sitzmann's research finds. That includes diversity and harassment training and job tests for managers.

“The DEI pullback trend we’re seeing is nerve-wracking,” says Carmen Bohoyo, North America executive lead of auto, retail and hospitality businesses, at Kantar, which has done extensive research on the impact of how corporate and social responsibility efforts impact business results. “And it’s surprising. They seem not to understand the overall implications of how DEI efforts impact their ability to grow, in both sales and profits.”

Even though the changes Lowe’s and other companies are making primarily affect internal policies, they all feed into broader measures of corporate reputation. “And that reputation impacts sales consideration, and ultimately, brand value,” Bohoyo tells Marketing Daily.

Not all companies have caught up with how fast reputation perceptions have moved, particularly among younger demographics. The umbrella Kantar calls sustainability, which includes environmental, social and employee efforts, “is the most important driver of corporate reputation, contributing to 45%. In 2010, it was just 17%.”

Lowe’s recently reported second-quarter sales results below expectations and pared back its forecast for the full year. And while it is afflicted by the same set of macroeconomic challenges as competitors -- a stalled real-estate market means fewer DIY projects -- Seth Basham, who follows the company for Wedbush, is concerned that Lowe’s DIY declines are in the range of 8% to 9%, while rival Home Depot sales drops are estimated between 4% and 5%.