Any type of reality is probably racist by nature.
The SUPER CRINGE "racial tensions" we have in our real world, are a complete joke compared to what is going on in Faerun.
A realm that has actual different Races and not just different ethnicitys.
Racism is part of this worlds REALITY.
Removing it is the same as breaking the entire universe.
So no - the racism must stay.
Going Woke never ends well.
I expect the threadopener to already know what I have written and just being so bored that he wrote his openingpost just for trolling purposes.
Couple of things here.
There are very real issues in real life that should not be dismissed, are part of a long history of building tragedy on tragedy and are heavily tangled into everyday things. It's a serious subject matter.
The existence of different species of beings does not automatically justify people hating each other over differences.
And there is a big difference between representing the existence of racism within the fiction of the universe and building the game and setting itself embedded with concepts that support the sort of thinking that racism has merit.
Certainly you can have a long history of elves and orcs hating each other, that's historically represented in our own existence. But you shouldn't present it as a natural thing that is inherent or can never be amended. The gods in this setting are individuals and characters, not vaguely distant forces that may or may not exist... and the gods are not infallible. Corellon and Gruumsh pushing their personal grudge onto their followers as an example. Again, real life has lots of examples of a feud between two people resulting into a bloody conflict between groups.
The setting can have racism, especially if you want to explore that story arc, but it by no means needs it.
Plus you have things like the Barbarian class.
Barbarian is not a statement describing a skill set, it is a cultural term and it is a term used for a foreign culture in a demeaning fashion... and it's modern use is overwhelming that mode insult. Add to that the art for "Barbarian" is a mix of First Nations and Viking stereotypes along with a mix of other low tech cultures.
You can certainly have people with the skill-set of the class from any culture, not just low-tech cultures, and yes, you can build such a character if you want, but the fact that all the art and characterization of the class is that is an example of things that encourage real world bad behavior.
Likewise, the treatment as goblins and orcs as always savage or cowardly or sneaky or whatever else is equally damaging. It's the "this is their natural state" part of depictions that is harmful. It can be the culture that has developed, but it shouldn't be represented as the only possible way they could exist.
No, you can't control what is done in a home game, but you shouldn't encourage or turn a blind eye to such things, because some asshole will take it as tacit approval for such behavior.
"It's what my character would do" "my alignment says I should kill orcs" etc....
It's minor in comparison to people literally getting killed unnecessarily, but it's still a problem... and it scares off possible newcomers to the hobby.
When you publish, you have to be careful over how you might encourage people to behave.