In Los Angeles, diversity is not a corporate initiative. It’s a market condition. 

From entertainment studios and consumer brands to logistics hubs and professional services, the region’s economy is inseparable from multicultural consumers, immigrant entrepreneurship and a globally sourced workforce. 

Yet even in a city with such plurality, the concept of diversity, equity and inclusion still faces ongoing scrutiny nationwide – leaving Los Angeles businesses to quietly recalibrate how, and whether, they talk about inclusion at all. And the shift isn’t always visible in public messaging.

On the ground, among economic development leaders, communications strategists and the thousands of small business owners – many of whom are minority-owned – the work continues despite it all. And it’s increasingly folded into operations rather than statements.   

“There was a big resettling of expectations,” said Guillermo “Memo” Kahan, founder and chief executive of PromoShop in Playa Del Rey. “It might not be as advertised as much as it used to be. But the advocates are still working with the companies they’ve always worked with.”

Kahan has run his marketing and promotional products services firm for nearly 30 years, and so his depth of experience reflects a broader reality across L.A.: DEI may be under rhetorical pressure, but economic necessity has made retreating impractical. Also, for many L.A. executives and business leaders, the issue isn’t whether DEI matters, but whether its value has been clearly articulated.

“Just because you don’t talk about it doesn’t make us any less diverse,” said Stephen Cheung, president and chief executive of the Los Angeles Economic Development Corp. “That’s who we are. We are diverse.”

The quiet shift

In the years following 2020, companies moved quickly to make public commitments around diversity – expanding supplier diversity programs, pledging funding and elevating inclusive messaging. Today, many are doing the opposite: scrubbing language, restructuring departments and shifting DEI responsibilities to human resources, procurement or environmental, social, and governance teams.   

“There’s a difference between pulling back on language and pulling back on action,” Bilal Kaiser, founder of Culver City-based public relations firm Agency Guacamole, which works with global beauty and lifestyle brands on influencer marketing, public relations and experiential strategy. “Brands are being more cautious about what they say publicly. … That doesn’t mean the work has stopped,” Kaiser said.

He noted that L.A.-based brands are moving away from performative gestures and toward structural changes. The recalibration is about risk management and credibility. He said many companies are now focused more on how inclusion shows up in hiring, product development and creator partnerships.

And Los Angeles occupies a unique position in this evolution of diversity, equity and inclusion across its business community. It’s particularly evident in the beauty industry, said Kaiser, who hosts an annual industry panel to allow for more diverse voices in the beauty and lifestyle space.

“What I love about Los Angeles is that evolution is built into how things are done,” Kaiser said. “We’re open to different ways of thinking and being. That ethos impacts everything – not just beauty but entertainment, wellness, real estate and finance.”

‘The four E’s’

Cleveland Brown, chief executive of Payscout, frames the current moment through what he calls “the four E’s” of DEI: education, enablement, enforcement and evolution.

“In the beginning of what’s happening is the education behind the efficacy of DEI has been lost in translation,” said Brown, who founded his Sherman Oaks-based fintech and payment processing firm in 2012. “It’s almost like the people who have researched and looked at it, they understand it and really want to get into the metrics of it – what are the actual outcomes? But in a general broad stroke, the education hasn’t translated across the board,” making DEI an easy target.

Brown cited data that shows 36% of businesses that implement DEI initiatives have increased profitability. But that highlights why having key metrics is critical at this juncture, he said.

“As a fintech company, the numbers matter,” Brown said. “What are the effects of diversifying the supply chain? What does it mean to a company’s bottom line when you engage minority-owned enterprises? How is innovation and creativity impacted? How do you measure the productivity of the workplace?”

If you can measure the benefits of DEI programs before and after, it stops being ideological. That loss of clarity, Brown said, has allowed the critics to blame DEI for outcomes that more accurately may be tied to weak hiring practices, poor professional development or unhealthy workplace cultures. 

“When we see the blame of DEI on outcomes, I don’t look at it that way. I’m like … show me the numbers,” he said.

The “enablement” side is then “documenting that information, sharing that information and pushing that information out into the world” and across various platforms. That will lead to enforcement of changing mindsets and behaviors, followed by the evolution of the narrative. 

“Once we kind of evolve the narrative with data, and hard data,” Brown continued, “that goes back to the first E, we educate everyone with that new data, and then we keep cycling through this process and we try to get better and better.”

Small businesses, big impact

The economic data support the need for that evolution.

According to a 2024 Beacon Economics report commissioned by California’s leading ethnic chambers of commerce, the state is home to roughly 1.9 million “diverse-owned small businesses.” Diverse is defined as “racial/ethnic groups that are considered minorities, including Asian, Black/African American, Hispanic and Native American.” 

That total represents nearly half of all small businesses statewide, and together they generate $414 billion in annual economic output, support 3.6 million jobs and contribute more than $50 billion in tax revenue. 

If California’s diverse-owned businesses were a standalone economy, they would rank larger than the populations of Oregon and South Carolina. 

These small minority-owned businesses “are not just businesses – they’re an economic driver,” said Miriam Valdes Ibarra, economist and manager of policy and economic development at Beacon Economics. “They’re supporting (our) GDP, supporting output in labor income. They bring vitality (in our state).”

Valdes Ibarra added that if these companies struggle, the ripple effects extend far beyond that business – noting that nearly 87% of minority-owned businesses are nonemployer firms, meaning they have no paid employees beyond the owner.

“These impacts can’t be isolated, because these firms even if they are not an employer, they’re linking to a broader supply chain and to broader industries,” she said.  

L.A.: A small-business impact

Those ripple effects are especially pronounced in Los Angeles, where small businesses dominate the regional economy. In a report on the county’s small business community, LAEDC estimates that roughly more than 90% of businesses in the county have 20 or fewer employees, and the vast majority are sole proprietorships.  

Los Angeles is a small-business region, said Cheung. And given that our population is nearly 70% diverse, “I think comfortably we can say that (the L.A. region) will have one of the most concentrated diverse ownerships when it comes to small business.” 

Among the region’s more than 7,500 minority-owned businesses, the economic development organization also found that most are concentrated in 34 cities in L.A. County including the San Gabriel Valley, the Gateway cities and the southern end of the county.

For Brown, such data points – from a state level down to the region – speak to the “impact” minority-owned businesses have made – and will continue to have in the region.

“That’s real money going back into communities,” he said. “But then the next question becomes: where’s the collective voice behind that impact?”  

Brown added that even as an experienced entrepreneur, those figures surprised him – underscoring how poorly the economic contribution of diverse-owned businesses is misunderstood. 

“That’s an education gap for sure,” he said. “And until we close it, we’ll keep having this same conversation.”  

Barriers beyond the numbers

Yet despite their scale and scope, “diverse-owned” businesses face persistent structural barriers.

Beacon found that minority-owned businesses account for 53% of California’s small businesses, but only 37% of total small-business revenue – reflecting disparities in capital access, scale and industry concentration. 

Those pressures are compounded by declining foot traffic, labor instability and immigration-related fear that has kept customers home in some communities – particularly among locally serving retail and service businesses.

“When people are too afraid to leave their homes, demand drops,” said Cheung. “That directly affects neighborhood businesses. We’re seeing that right now.”

Access to capital still reigns at the top hurdle for diverse-owned businesses, said Valdes Ibarra.

“That’s not accidental,” Valdes Ibarra said. “These businesses face longstanding structural barriers – especially access to capital. DEI programs were helping to close some of those gaps. Rolling them back introduces new friction at a moment when many businesses are still recovering from (the Covid-19 pandemic).”

Kaiser echoed that sentiment, adding that less than 2% of venture capital funding nationally goes to non-white founders – a figure that has barely moved since 2020. 

“That’s the disconnect,” he said. “We talk about commitment, but the numbers don’t move.”  

Beacon Economics’ analysis shows that overall operational structure – not just ownership – is instrumental. Sole proprietors generate significantly less revenue per worker than employer-based firms, limiting growth potential.

Government procurement represents one of the clearest opportunities to close that gap – as many minority-owned businesses are concentrated in industries where government spending is already higher. That includes construction, professional services, transportation and health care. Still, these businesses remain underrepresented in public contracts, the Beacon report found.  

Next generation of consumers

As political winds shift, consumer behavior remains constant– particularly among Gen Z and millennials. 

“Demand ultimately comes from society,” said Valdes Ibarra. “Consumers play a role in sustaining these businesses.”

Kaiser noted that creator culture accelerates that feedback loop. Social media platforms shorten the distance between corporate decisions and public response, placing reputational risk front and center. 

“In L.A., evolution is table stakes,” he said. “If you’re not adapting, you’re falling behind.”

 Yet the debate over language and messaging risks obscuring a more fundamental truth: inclusion is inseparable from economic growth, said Cheung.  

As Los Angeles prepares to host major global events – including the 2026 FIFA World Cup, 2027 Super Bowl LXI and 2028 Olympic and Paralympic Games – Cheung said the city’s diversity will shape investment decisions. 

“Our mission is inclusive economic development … we’re not going to back away from that,” he said. “The world is coming to L.A., and investors want to bring their families somewhere they feel welcome. That matters.” 

Beyond an acronym

For all business owners – like Brown, Patten, Kahan and many others – inclusion has never meant lowered standards.  

“The fact that we’re diverse doesn’t mean we belong automatically,” Kahan said. “It means we get an opportunity to show we’re as good as – if not better – than incumbents.”

Kahan’s firm has worked with some of the world’s largest companies including Netflix Inc. and Mattel Inc. He credits that work not to preferential treatment but to scale and operational rigor. Also, “it takes years to build that trust,” he said.

Most executives expect the DEI acronym itself to fade, even as the function remains. 

In Los Angeles, where diversity defines both the workforce and the consumer base, inclusion is no longer a branding exercise. It’s an economic reality – even when no one says the word out loud. 

“Is it DEI with metrics? Is it with ROI?” said Brown. “What lens are you going to look at it through?”

For Kahan, the path forward is familiar. 

“We’ve been through tough cycles before,” he said. “You keep doing great work, you give back to your community – and the opportunities still come.” 

Managing Editor Monée Fields-White contributed to this report.