By Ben Dummett and Joe Wallace

Companies with operations on both sides of the Atlantic have a new formula when it comes to DEI -- and it depends on the location.

Grocery store chain Aldi, investor-advisory firm Institutional Shareholder Services and lender Banco Santander are among the businesses to have recently recalibrated their diversity, equity and inclusion policies to vary by region.

In some cases, companies are excluding the U.S. from what were once global commitments. In others, they are scrubbing buzzwords and acronyms -- such as LGBTQ -- from American websites and annual reports, while still promoting DEI goals elsewhere.

The moves aim to avoid unwanted attention from the Trump administration, which has ordered an end to DEI programs across federal agencies and threatened to investigate the "most egregious and discriminatory" corporate practitioners.

Facing an anemic economy at home, Europe Inc. is eager to avoid lawsuits or consumer boycotts in the faster-growing U.S. market. The challenge is to do so while abiding by regulations in Europe, where there are moves to introduce more DEI requirements, and keeping customers and staffers on board.

"European companies choosing to pause or roll back DEI initiatives could face significant regulatory risk and reputational backlash in Europe," said Jeanne Martin of U.K.-based ShareAction, a responsible-investment nonprofit.

ISS said last month that it would no longer consider the racial or gender composition of American companies' boards when making its director voting recommendations to shareholders. But the advisory firm plans to continue to do so for European companies.

The deviation suggests ISS isn't "clear on the definition of good governance," said Thomas Schweppe, managing director of investor advisory firm 7Square.

ISS, which is majority owned by German exchange operator Deutsche Börse, attributed the change President Trump's targeting of DEI. A spokeswoman added that the company had communicated extensively with clients to avoid any confusion related to regional deviations in policy.

Santander is also now applying DEI practices differently around the world. The Spanish bank said last month that bonuses for executives would no longer take into account how much they helped get women into management positions in countries where government policy "does not support establishing specific inclusivity objectives." DEI scores had previously fed into pay globally.

That change coincides with Santander's expansion into the U.S., where it launched its digital Openbank service last fall. A Santander spokesman declined to comment.

While many of America's biggest companies have dropped diversity goals, some with a large footprint in Europe are seeking to strike a balance too.

McDonald's, for example, said in January that it would scrap set diversity targets in the U.S. But the fast-food chain is publicly sticking by a commitment in Britain to ensure that 40% of all senior leadership roles are held by people from underrepresented groups by 2030.

A McDonald's spokeswoman declined to comment.

Corporate advisers said they have been inundated by companies seeking advice on how to navigate diverging DEI rules and expectations on either side of the Atlantic.

"It's like an avalanche," Christoph Seibt, a partner at law firm Freshfields in Germany, said of clients' inquiries. Companies are particularly nervous about being named in a report Trump has asked the attorney general to prepare on DEI by late May, he said.

A common response has been to pare back language describing diversity commitments.

Aldi earlier this year eliminated references to DEI from its U.S. website, though the privately held German retailer still displays support for a diverse and inclusive workplace in parts of Europe. An Aldi representative didn't respond to requests for comment.

SAP has taken a similar approach. The software provider said in its annual report published last month that it aims to boost workforce diversity and inclusion to reflect society as a whole. But the company didn't include the terms race and LGBTQ+, both of which appeared in the previous two reports.

A spokesman for SAP said the company was reviewing Trump's executive orders to assess any potential impact.

The shift to hew more closely to the U.S. standpoint is in some ways a reversal of the so-called Brussels effect, whereby the European Union has sometimes set norms for global businesses through its regulation of a market of 450 million people.

"Companies face significant risks whether they choose to follow Trump's policies or not," said Lindsay Burke, a U.S.-based lawyer at Covington & Burling.

Either decision runs the risk of litigation as well as employee and customer dissatisfaction, Burke said, all of which could dent profits and hurt shareholders.

British drugmaker GSK last month scrapped targets to boost the number of people from ethnic minorities in senior roles in the U.K. and U.S., and women in senior roles globally. It also cut a pledge to spend more each year on U.S. suppliers with diverse ownership, and removed the word diversity from a webpage about doing business responsibility.

The company, which is based in London but generates more than half its revenue in the U.S., is sticking with a commitment to test drugs on diverse trial participants.

While the policy changes have faced some criticism at home, GSK said the moves were needed to "remain compliant with the law in the countries in which we operate, including the United States."

Write to Ben Dummett at ben.dummett@wsj.com and Joe Wallace at joe.wallace@wsj.com

(END) Dow Jones Newswires

March 20, 2025 05:00 ET (09:00 GMT)

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