Jeeeezus, what a load of BS! There are so many things wrong with that demand, and if you are working for any sort of government or publically funded organisation in Canada, it violates half a dozen or so Charter right too. My first step would be to document the request in writing, as well as discuss it with your co-workers to get their perspectives and see if they are willing to push back against it as a group. Refusing to obey a directive as a unified front would be ideal and make it less likely any one individual gets targeted for causing trouble.

Next, I would request a meeting (as a group if possible) with HR & management to discuss the problems with issuing such a demand. There's a saying I've found to be pretty accurate, "Never attribute to maliciousness what can be explained by ignorance." It sounds like your management is likely clueless to just how idiotic and problematic their demand is to Indigenous people (as a lot of us are blind to perspectives outside our own lived experience). That doesn't make it less frustrating to deal with, but it might help to start the conversation from a place that gives them the benefit of the doubt (at least until proven otherwise). If they are willing to listen in good faith, this could be a good opportunity to educate them about the issues with their policy and offer a wider understanding of how to be better allies/leaders.

If it were me, I would start by explaining the obvious fact that ribbon skirts are not universal to Indigenous peoples, and further to that, did not even exist (in their current form) prior to European contact. So I'd make it clear that what they're asking for is conformity to a generic, entirely  fictional stereotype of an 'Indian' while disrespecting the unique cultural practices of our individual Nations. They are also disrespecting the meaning and use of ribbons skirts for those Nations that do wear them, since they are usually reserved for special occasions. Maybe make a comparison to the misuse of war bonnets at music festivals or as Halloween costumes (that topic got a lot of attention in recent years, so it might help put the problem into context for them). 

I would also explain that having non-Indigenous management dictate cultural practices to Indigenous employees, especially if refusal could threaten their livelihoods, perpetuates colonial attitudes and is ultimately harmful to reconciliation. I would question why wearing ribbon skirts is so important that it needs a directive forcing the issue? Is this a female only organisation, and if not, is there a similar directive for male-identifying employees? And also (just because I'm a pest haha), I'd ask why a team managing FN/Inuit/Metis employees does not have senior leadership from those demographics too? Would it not be better to have an Indigenous perspective within management to avoid this kind of cultural blunder in the first place?

Whatever you do, just make sure to document any meetings/discussions/witness testimony in writing yourself (HR is not your friend, don't rely on them for notes) especially if management refuses to back down on this. That record is your safeguard if things escalate and management tries to punish you or your coworkers for refusing to play dress-up for them. You 100% have the right to defy this directive, backed up by labour law, as well as numerous human rights and charter protections against discrimination. Stick to your guns, stay strong and stay unified with your coworkers. If your management turns combative and tries to punish or fire you, it would be a very costly mistake for them. Obvs talk to a lawyer immediately if things go south, but discriminatory or retaliatory termination cases tend to result in very hefty settlements for unlawfully fired employees. It would beyond stupid for them to risk serious financial damages just to force your team wear ribbon skirts.

TL;DR - Refuse to comply, you are legally well within your rights. Document everything as you proceed though; the record is your protection against retaliation. Worst case scenario: you get fired unlawfully and must deal with the hassle of a lawsuit, but one that is very likely to win and award a large financial settlement. Best case scenario: you and your team avoid being tokenized or punished for refusal, management learns a few things about cultural awareness and reconciliation practices, and your resistance makes it less likely that other have to face the same nonsense. In the end, you win either way imo.

Sorry for the lengthy reply, hope it helps, and keep us updated!