European officials are weighing how to respond to US efforts to thwart local DEI programs, as the two regions come closer than ever to clashing over anti-discrimination policies.
US embassies across Europe have spent the past few weeks sending letters to companies and public offices doing business with the American government, demanding that they certify that they don’t have diversity, equity and inclusion programs that violate US President Donald Trump’s executive order.
The European Commission is aware of the issue and is currently working with European Union member states to figure out the impact of the US campaign and how best to respond, a spokesperson for the bloc’s executive branch told Bloomberg. DEI issues such as gender equality are enshrined in European law.
Secretary of State Marco Rubio is committed to ensuring that Trump’s executive order banning DEI initiatives is carried out by the department and US embassies, a State Department spokesperson said by email.
The US campaign has left Europeans bewildered, with politicians and business heads speaking out in dismay about the development.
Jan Valeskog, vice mayor for planning for the city of Stockholm, said staff members were “shocked” when the department got a letter in early May. In the correspondence, the US embassy in Sweden gave the city of Stockholm 10 days to confirm that it would comply with the order to drop DEI, he said.
“Of course we’ll not do that,” Valeskog said in an interview. “For us, it’s very important to work with diversity, equality and inclusion,” he said, noting that the requirement is legally binding in Sweden.
If, for example, the US embassy seeks a building permit, it will need to comply with Swedish law, and so, “I mean, it’s their problem,” he said.
The EU is already fielding attacks from the US over ESG (environmental, social and governance) regulations that apply to international firms seeking to do business in the region. US Commerce Secretary Howard Lutnick has said he’s willing to use a range of levers, including “trade tools,” in retaliation against such rules.
The US Chamber of Commerce also has appealed to the Trump administration for support in its battle against Europe’s Corporate Sustainability Due Diligence Directive. CSDDD requires companies seeking to do business in Europe to have credible climate-transition plans and to ensure that their value chains are free from human rights violations. Last month, EU lawmakers delayed its implementation by a year amid renewed debate.
The rift over DEI threatens to exacerbate trans-Atlantic tensions.
It’s not “just a sort of fork in the road between the US and Europe,” said Raoul Parekh, an employment lawyer who heads the international practice in the London office of Littler Mendelson PC. It’s more like the two jurisdictions “are driving in completely opposite directions,” he said.
Among Trump’s first actions in his second presidency was to sign an executive order banning DEI from the federal government and its contractors, and ordering agencies to launch investigations into any organization that promotes what the White House has dubbed “illegal DEI.” A May survey by Littler Mendelson of corporate executives based in the US found that 55% expect to change their DEI programs as a result of Trump’s executive orders.
The atmosphere of hostility toward DEI and ESG has rocked institutions that had sought to champion diversity not just in the US, but globally. In some cases, European companies with a large US presence are now opting to tone down their DEI work. Among the latest examples is German software giant SAP SE, which dropped its global goal of having women fill 40% of its jobs.
The change is among several made by SAP “in the area of diversity and inclusion (D&I) to reflect current legal developments in order to ensure legal compliance, as well as a safe and inclusive work environment,” Daniel Reinhardt, a spokesperson for the company, said by email.
German carmaker Volkswagen AG told shareholders last week that it’s decided to exclude US subsidiaries from its global DEI targets, citing “regulatory reasons.” Meanwhile, VW’s luxury brand — Porsche AG — said on Wednesday that it has “no knowledge” of any US government request relating to DEI, and that its German business is sticking to diversity targets. At the same time, the company said its US business isn’t subject to those DEI goals and complies with local laws.
In the US, companies saying they’ll cut or curtail their DEI policies include International Business Machines Corp., Intel Corp., Accenture Plc, Walmart Inc., Meta Platforms Inc. and Amazon.com Inc., to name just a handful. At the same time, there’s evidence that some of those steps are more of an exercise in semantics than a fundamental about-face.
Critics of the US approach say decades of work to address discriminatory policies that favored White males are now at risk of being wiped out. But instead of caving in to Trump’s demands, European regulators are moving ahead with existing plans to prioritize gender and racial diversity and address discrimination in the workplace.
“In the face of any attempts to challenge these values or the rule of law, we double down our efforts in supporting the implementation of legislation that strengthens equality and inclusion,” Carlien Scheele, director of the European Institute for Gender Equality, said by email.
In the UK, the government is considering requiring employers to develop plans to close the pay gap that now exists between most ethnic minority groups and White Britons. And it’s set a June 10 deadline to respond to the consultation, which also addresses the pay gap faced by people with disabilities.
In the EU, companies face a June 2026 deadline to meet targets set by the EU’s Gender Balance on Corporate Boards Directive, passed in an effort to bring women’s representation among non-executive directors to at least 40% at large companies. After that, companies will have to take action to reduce any pay gaps that exceed 5%, as the Pay Transparency Directive is phased in.
Europe’s embrace of DEI initiatives coincides with its efforts to tackle a declining workforce. In a March report, BusinessEurope said increasing women’s participation, particularly in science, technology and engineering, is critical to shoring up the bloc’s competitiveness as the population ages and shrinks.
While the Brussels-based organization said it’s aware of the US letters received by members, it declined to comment further.
Investors, meanwhile, are taking note.
During a presentation this month, Matt Christensen, global head of sustainable and impact investing at Allianz Global Investors, said he was “amazed” to hear that companies — including in France, where he lives — had received letters from US embassies, and that the development has led some to adapt their policies.
Christensen said he’s aware of the changes at SAP. As a shareholder, it “will be a discussion that we’re going to have,” he said.
Photograph: The US Embassy in Stockholm, Sweden. Photo credit: Jonathan Nackstrand/AFP/Getty Images
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