On Wednesday, the UK’s Financial Conduct Authority issued new targets for all public companies in a bid to up representation of women and ethnic minorities on company boards and in senior leadership positions.

Under the new requirements, companies are expected to have at least 40 percent women on their boards and at least one person from a non-white ethnic minority group, as well as at least one woman in a top executive position like chair, chief executive, chief financial officer or senior independent director. Companies are required to report this information to the FCA and if they do not meet the requirements, they must “explain why not,” the financial watchdog said.

A BoF analysis of the composition of 18 UK-listed fashion, apparel retail and garment manufacturing businesses found that only five meet all three of the regulator’s criteria: Burberry, sportswear retailer JD Sports, Next, Ted Baker and Coats Group, a producer of threads, zippers and yarns.

Frasers Group, the parent company of brands including Sports Direct, Jack Wills, Agent Provocateur and Flannels, was the only company not to meet any of the three FCA targets. The company did not respond to BoF’s requests for comment.

The most widely achieved target was for ethnic-minority representation on the board, with 13 of the 18 companies already in compliance. Conversely, the majority of companies still fall short of the target for at least 40 percent female board membership, with only seven firms currently in compliance.

The move by the FCA marks the latest regulatory push for improved environmental, social and governance from the private sector. Fashion companies, in addition to facing scrutiny for their environmental footprint, are facing calls to improve diversity and representation at decision-making levels.

A Complicated Solution

The new targets will compel companies to play a bigger and more immediate role in addressing the “huge under-representation issue” among women and minorities in fashion leadership, said Caroline Pill, a London-based partner at executive placement firm Kirk Palmer Associates.

But regulations could also increase the risk that some firms will resort to box-checking rather than taking a longer-term approach and developing inclusive talent pipelines, experts say.

In response to international pressures (mostly from the US) and in anticipation of the FCA’s new guidelines, some companies had already begun to narrow their executive searches to just one segment of the population — usually women and/or minority candidates, Pill said.

A well-rounded diversity, equity and inclusion strategy for companies will include some fixation on “box-ticking” — to the extent that measurements help drive action and accountability — but a greater emphasis on long-term planning and building bench strength, she said.

“You always come down to the same problem, you need to find the best candidate for the role,” she said. “These regulations are going in the right direction in terms of what [the representation] should look like, but the reality is that you have to create diversity very early on… it doesn’t start at the C-suite level.”

The same holds true for corporate boards. Companies scrambling to assemble a diverse board of directors must invest financial and other resources into developing women and minority executives to serve in such roles, said Mark Lipton, a professor at Parsons School of Design and an advisor to corporate boards in the US.

“Diverse board members are most often coming in with little board experience and not investing in their capacity to think and act in a board member role can be a recipe for failure,” he said. “It’s an enormous lost opportunity if these new members cannot be promoted into leadership roles like officer or committee chair.”

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