It's easy:
As to the why:
Completely missmanagingmismanaging Monica.
Letting people come to the conclusion that you (SE) are actually lying about the how and why of the demodding, therefore throwing away lots and lots of goodwill and trust.
Forcing people who freely contribute time and content into abiding by what is a
minority(see below) opinion in respect to language use if they want to continue to contribute.
Point 3 would be much, much less of a problem if people hadn't developpeddeveloped trust issues due to point 2.
None of this is necessary in order to make sure the mods have the tools to deal with people being unkind or actually hurtful (and it's also far from sufficient). SE's continued refusal to see this is counterproductive.
So, how to begin fixing it:
Reinstate Monica.
Revert to the previous CoC while coming up with improvements that the community can stand behind.
Note that both of these are actions.
Edit:
I was asked to provide a source for my use of the term "minority opinion" in regards to pronoun choice in language use. With that term, I was especially referingreferring to Q9 and Q11 of the official CoC pronoun FAQ. For me, the more disturbing one is Q11, but on hearing "minority opinion", I guess people think of Q9, and for Q9 I was actually surprised to learn opinions are almost evenly divided, at least according to PEW Research Center publication 1 and PEW Research Center publication 2 (the basis for the first one). OTOH, the same sources also make it clear that there are a lot of people which are at least somewhat uncomfortable about using these pronouns. Anyway: I don't want to uphold my initial word choice, especially since the main issue of point 3 holds without it, too.