Scrapping DEI initiatives will hurt minority-owned businesses

DEI programs under attack

Diversity, Equity and Inclusion (DEI) initiatives were established to end discrimination and support communities historically facing barriers to work opportunities. But DEI has accrued a different terminology under the current Trump administration.

Since taking office on January 20, President Trump has issued several executive orders, one of which includes an order to end “wasteful” government DEI programs. The executive order has ended all DEI, DEIA and environmental justice offices and positions, along with equity-related grants and contracts within a period of 60 days.

On March 7, Ethnic Media Services held a national briefing about how ending DEI initiatives will impact minority-owned businesses. The briefing featured Dilawer Syed, the former deputy administrator of the Small Business Administrator (SBA), Dr. Esther Zeledon, founder of BeActChange, a small business affected by the policy changes, Thomas Saenz, president and general counsel of the Mexican American Legal Defense and Education Fund (MALDEF) and Elizabeth Barrutia, president and CEO of Barú, a women owned small business. 

More barriers for minority business owners

Syed, who recently stepped down from the SBA, which provides loans to thousands of small businesses nationwide, revealed that DEI initiatives helped racial minorities and women to start up in historic numbers. “Black women started a business at 4 times the rate of any other American,” he said in the briefing. He highlighted an unmet demand for entrepreneurship among communities of color. Syed revealed he traveled to over 30 states during his tenure at the SBA and realized that minority communities don’t have access to information as others do, which made the work of the SBA’s DEI initiatives even more important.

According to the Community Tech Network, about 38% of African Americans lack high-speed internet access or broadband access at home, severely restricting their access to information. This fact was reiterated by Zeledon, founder of BeActChange, who said at the briefing that she only found out about her undergrad college – Swarthmore College – through a DEI initiative.

The SBA has experienced several changes since Trump came to power, including layoffs and relocation of offices. Last week, the Colorado Sun reported that the SBA was moving out of its regional office in Denver to a less costly and accessible location. The agency is also slashing $100 billion in regulation as part of a Made in America Manufacturing Initiative.

Syed said that during his tenure at the SBA, he allocated 15% of the US government’s $700 billion annual budget for federal contracts to minority contractors and he achieved 80% of the target. Syed, however, pointed out that the SBA will continue to honor US law when it comes to new immigration policies for small businesses. But he cautioned that if there weren’t reforms in immigration, it would “choke a very important source of labor” in the country. A key reason for the SBA relocating six regional offices is over immigration policies in the cities where they are located. For example, Denver is considered a ‘sanctuary’ city, because it does not ask about people’s immigration status when providing services.

Larger companies moving away from DEI

Barrutia, president and CEO of Barú, a company funded by the SBA and certified as a women-owned small business (WOSB), explained she had to face several hurdles to get classified as a WOSB and the scrapping of DEI initiatives will now make it harder for people like her to get certified as a vendor. She also expressed concern about losing federal bids after the scrapping of DEI initiatives. Her marketing agency, Barú, is a cross-cultural marketing agency based in LA. Her clients include Disney, Planned Parenthood, Prime Video, Cal Kids and Fannie Mae. 

Barrutia explained that several big companies were moving away from DEI initiatives, such as Walmart and Target, and this posed a threat to minority businesses and minority owned products. “The thing is America is changing (demographically). They are effectively walking away from an opportunity of $8.6 trillion,” she said, while showing attendees a snapshot of the country’s changing demographics, where Latinos, Black, AAPI and LGBTQ+ people will constitute a significant chunk of the US population in the coming decades. Barrutia also told India Currents during the call that 2024 was an incredibly challenging year for her industry and the policy change presented even more hurdles for her company this year as there is less accountability for hiring diverse suppliers.

Stigma around DEI

Zeledon, the owner of BeActChange, another business affected by the policy changes, spoke out about the slander and stigma surrounding DEI initiatives. She said the language of the executive order made it appear that all efforts for DEI were wasteful and radical – which puts distrust in people. She also pointed out that the narrative was now owned by white males – a point that Saenz from MALDEF also highlighted in the briefing. Saenz iterated the importance of making sure that steps are taken to ensure that long-standing practices and even new ones don’t have a discriminatory effect on people of color and women.

A loss for DEI is a loss for all

Zeledon has lost 95% of her contracts since DEI was scrapped and attributed it to loss of trust in her work, despite proving herself multiple times over and even getting a PhD from UC Berkeley. 

She highlighted how this fear has seeped in everywhere – from universities that are now scared to lose federal funding over DEI to companies that are now scared of lawsuits because of DEI. “When you discriminate you lose out on the genius of a big population,” she concluded.