Four years after the murder of George Floyd sparked a social injustice movement that caused advertisers to make commitments to improve industry diversity, companies appear to be pulling back or reversing the promises they made.

Several confluent issues are slowing progress on diversity, equity and inclusion in certain pockets of the industry, according to 16 industry executives interviewed for this story, including DE&I consultants and diverse agency owners. Those include cuts to internal DE&I departments at ad agencies; layoffs disproportionately affecting people of color leading to a decreasing number of diverse executives and employees at agencies and marketers; and marketers scaling back on hiring diverse vendors, suppliers and running advertising that targets diverse audiences.

There are also factors outside the ad industry contributing to this deceleration.

A U.S. Supreme Court ruling in June 2023 effectively ended affirmative action in college admissions and many Southern states have since introduced nearly 100 bills that would limit diversity, equity and inclusion programs at state-funded schools. Utah, for one, passed an anti-DE&I bill that goes into effect on July 1. While these bills only apply to education, they are having ripple effects throughout the U.S. Companies including marketers and agencies are skittish because of the conservative-led DE&I backlash and are questioning how they are discussing their own DE&I programs and investments in this area.

Continued financial pressures have also caused some companies to make cuts, and DE&I is one of the first areas to be scrutinized, according to some of the people interviewed for this story.

“There is a panic or fear that’s happening,” said Darren Martin, founder and chairman of integrated marketing firm Streamlined Media & Communications and founder and CEO of its subsidiary, Bold Culture, an inclusive marketing and workplace development consultancy. “People don’t want to be canceled. The influx of DE&I programs, in ideology and investment financially into certain groups, was a lot [in 2020]. And it was impactful. What we’re seeing is a backlash to that.”

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DE&I department changes

While many companies continue to invest in DE&I, 59% reported an increase in backlash to their DE&I efforts since the Supreme Court’s decisions on affirmative action last June, according to a January report from Littler, which surveyed 322 C-suite executives in the U.S. last November.

Conservative shareholders of some major marketers, including Coca-Cola Co., UPS and Home Depot, are trying to force changes that would hamper DE&I efforts at these companies, according to an Atlanta Journal-Constitution report.

There is a “growing concern about legislation being passed that could affect DE&I strategies across the board,” said Ezinne Okoro, VML’s global chief client and culture strategy officer and former Wunderman Thompson global chief inclusion, equity and diversity officer. “Though most are directly related to admission processes at universities, corporations are worried about violating any laws.”

Increasingly, Okoro said, companies are consulting their legal teams “when building DE&I strategies.”

“I haven’t specifically noticed any changes with titles based on the legislation, but criteria for DE&I programs are evolving to include more language, explicitly not leaving any room for someone to interpret exclusion,” she said. “For example, a sponsorship designed for people from Asian descent might now say their focus is on Asian-American and all persons interested in a sponsorship program. Or an employee resource group is open to all employees regardless of demographic and highly encouraged that everyone joins different groups.”

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DE&I departments are also facing budget cuts. A DE&I executive who was laid off and requested anonymity said job opportunities in advertising have been bleak. The person said they have applied to 55 jobs in six weeks and received two interviews, and they have seen no open DE&I positions within the major holding companies.

“There’s nothing,” this person said. “There’s a high probability of me not staying in advertising.”

When Omnicom’s DDB Global Chief Diversity, Equity and Inclusion Officer Nikki Lamba left last June, the agency did not replace her in the role. In April, Interpublic Group of Cos.-owned Mediahub laid off Michelle Gustilo-Smithson, its VP and HR director of diversity, equity and inclusion, as part of a larger decision by IPG Mediabrands to consolidate individual agency DE&I efforts within the network. Jeff Marshall, chief diversity officer and head of diversity, equity and belonging for UM Worldwide, was also affected by the layoffs and IPG Mediabrands consolidation.

Lamba, Gustilo-Smithson and Marshall could not be reached for comment.

“Nikki made her own voluntary decision to leave,” a DDB spokesperson wrote to Ad Age. “Her relationship with DDB was strong through to the end, where she agreed to work an extended notice period to ensure business continuity.”

The spokesperson added that DDB has “intentionally shifted the role of DEI from a siloed practice, putting DEI&B at the core of every people & culture process and activation … We will continue to closely partner with Omnicom Global Chief DEI Officer Emily Graham and our many talented, and diverse leaders across the DDB network to keep DEI&B a top priority.”

An IPG Mediabrands spokesperson confirmed to Ad Age that it restructured the individual agency teams that are part of its “people experience” function, including DE&I, into one network group. “Our goal was to deliver a more consistent, connected experience for all employees by ensuring they have access to the most impactful programs and talent initiatives that exist across our network,” the spokesperson said.

Agencies in particular are pressured by clients scaling back marketing budgets and there has been a wave of layoffs as a result, many done quietly in a series of small batches. Martin said efforts to consolidate individual agency DE&I efforts at a holding company level is a trend he is seeing, as well.

“What happened? The same thing that usually happens,” Martin said, noting DE&I is always one of the first areas to be scrutinized. “DE&I was the first thing to be like, ‘Can we cut it to save money?’”

To be sure, there are agencies that are still investing in DE&I.

Empower Media, despite seeing a string of staff departures and client losses last year following an ownership change, doubled down on DE&I by recently promoting Chief People Officer Marijke Woodruff to chief diversity and inclusion officer. At the same time, the Cincinnati-based creative and media agency launched Empower Her, which invests in nonprofit organizations helping advance women- and minority-owned businesses.

“It is our philanthropic arm of the agency where we want to invest in nonprofit organizations focused on women breaking that glass ceiling of equality and really fostering a culture of empowerment for women and other underserved or social issues,” Woodruff said of Empower Her. “It’s not just for women, but we feel that we have that responsibility.”

Marketer pullbacks

Marissa Nance, founder and CEO of Native Tongue Communications, one of the first and only female- and minority-certified media agencies, shared her experience during a Female Quotient panel at Advertising Week New York last October of two major clients moving their business because they said they were scaling back on the number of diverse-owned vendors they employ due to the shaky economy.

“About February [2023], I got two calls,” Nance said on the panel. “They were very similar but I’m going to give you one of them; the one that resonated the most. It was from a non-Hispanic, white cis-male [who] said ‘I want you to know that we’re not going to work with you … this is going to be a rocky year with the economy and my P&L is more important than my diversity that I have to claim.’”

Nance told Ad Age that she had already done work for the Fortune 500 company, and that the marketer essentially told her that she could sue him, but she would not be paid for that work. Nance said she needed to pay her people who were already clocking hours doing work for the two companies and could not afford to sue.

As of May, she said Native Tongue has still not fully recovered from those losses. It was “over $500,000” between the two of them, Nance said. “Beyond that happening to us, there have not been a lot of new opportunities.”

This is part of another troubling trend diverse-owned agencies are seeing right now.

Hilda Adeniji, senior production manager for Unilever within its marketing and engagement department and co-founder of MWBE-certified cultural consultancy Transform the Hustle, said there is a growing move, especially in the consumer packaged goods space, of companies consolidating their marketing budgets with one agency of record, which is typically a white- and male-dominated shop, and scaling back with diverse-owned vendors. She specified that she was not referring to Unilever.

“Brands are going back on initiatives they were doing or phasing them out quietly,” she said, referring to commitments that were made to hire more diverse suppliers and vendors. The cuts are primarily affecting marketing, advertising, experiential and influencer budgets, according to Adeniji.

This is making it harder for diverse-owned agencies to survive and thrive.

Dawn Wade, managing partner and chief strategy officer of Louisville, Kentucky-based Black-owned creative marketing agency Nimbus, said it’s also frustrating that a lot of brands still only hire diverse-owned agencies for DE&I-related projects or multicultural marketing. She said she wants to see more major marketers hire diverse-owned agencies for “general market” work.

“It’s as if a [diverse-owned agency] is not capable of talking to everyone,” Wade said. “And it makes you wonder why? Because we’ve always had to acquiesce to a general market. So how are we not able to create ideas and creative that will resonate with that, as well?”

Hope Smith, director of brand strategy for Nimbus, said many marketers also have a general distrust of their diverse-owned agency partners.

“That’s one of the things that we’ve dealt with for a long time, the lack of trust in what we’re saying just because those that are in leadership don’t understand the insights or don’t understand the deep cultural roots or nuances that come with a lot of the work that we do,” Smith said. “It makes them uncomfortable, honestly. Instead of leaning into that discomfort and trusting your agency and putting out something that’s going to be bold and disruptive and make your brand stand out, a lot of times it is watered down to be 20% of the original idea that we pushed. That just hits you in your gut as a partner.”

This declining investment with the excuse of an unstable economy continues to persist despite ample evidence that there are financial gains for companies that hire diverse employees and vendors and invest in targeting diverse consumers. A McKinsey & Co. report from December found companies with greater executive representation of women and people of color had a 39% greater likelihood of financial outperformance.

Declining numbers

The slowing progress is being reflected in the number of diverse employees at brands and agencies.

In 2023, diversity within the marketing industry dropped for the first time in several years—people of color made up 30.8% of the marketing industry last year, down from an all-time high of 32.3% in 2022, according to a February study by the Association of National Advertisers. And a 4A’s study last year found that the number of agencies owned or run by white executives jumped to 90.2% in 2022 from 73% in 2021.

​​Hiring and talent experts in the industry have told Ad Age that layoffs are impacting people of color disproportionately. 4A’s CEO and President Marla Kaplowitz has said though she doesn’t have hard data on how layoffs are impacting people of color in particular, staff cuts are affecting “a lot more junior- to middle-management roles. If you look at just the composition of agencies, more diverse people are junior to mid-level,” she said.

A talent recruiter who spoke on condition of anonymity said a lot of the calls she was getting in 2020 to help agencies and marketers hire diverse employees feel “performative” now. This recruiter said there really isn’t a mandate for diverse recruits anymore.

“If I look at my talent that I’ve placed in the last two to three years, the majority are diverse talent and I was really proud of that work,” this recruiter said. “There was such a huge, huge urgency for diverse talent. A lot of that was just PR. The diverse talent knew it was. I knew it was … I think because of this quote, unquote recession, companies are just like ‘We need the skills [and] we can’t worry about [diversity] anymore.’”

These declining numbers have a ripple effect.

Dèja Mays, a freelance art director and co-founder of The Come Up, a networking event series with The One Club, set up to help Black, Indigenous and people of color in advertising, said all of these diversity issues she consistently sees within the ad industry make her question if this is the right career for her. Mays said her peers of color in the industry have had a harder time finding work than their white counterparts in the past few years, even after companies made commitments in 2020 to improve staff diversity.

“Even though I love being creative and I love advertising and marketing, I don’t really know my value in this industry,” Mays said. “You can’t treat people’s culture as a trend. We’re valuable. To me, if you’re cutting budgets and you’re cutting people of color out what does it say about you? About how you think about people of color?”

Marina Filippelli, CEO of multi-segment agency Orci, said the brands that have fewer people of color working on their marketing are the same ones not investing properly in reaching diverse audiences or employing diverse-owned vendors. Companies are “less focused on making sure that they have the right minorities represented in the marketing organizations that are making the decisions,” she said.

When brands do not invest in diversity or have the right people creating the ads that are intended to target diverse audiences, mistakes and missteps also happen, Smith said.

“The consumer is only getting louder as brands are getting a little bit quieter when it comes to diversity,” she said. “Don’t be the brand that gets canceled because you don’t see the relevance and the importance that a certain group of people has.”

Beyond missteps, brands are missing out on a financial opportunity by not employing diverse employees. DE&I consultant Shari Dunn said she recently worked with SharkNinja, a product design and technology company, and an idea to create a hair dryer with features to better serve people with curlier hair came from an engineer of color.

That product “opens up exponentially more market share,” Dunn said. “And Black women spend a shit ton of money on their hair … If companies are pulling back on their diverse marketing, [they’re losing out on] trillions of dollars. So you’re saying you just don’t want the money? This is a legitimate question.”