May 03, 2023

A rare glimpse inside Peru’s regenerative organic cotton supply chain

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By Bella Webb

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Thirty years ago, Pedro Huallamares's cotton farm in Peru — which he inherited from his father — seemed like it was thriving. Practising conventional farming methods, however, meant that the farm was overly reliant on synthetic fertilisers and pesticides, causing both the land and Huallamares's health to suffer. So, he made the decision to take on the time- and resource-intensive process of switching to organic farming. Now, in his second year of regenerative organic agriculture, Huallamares's itchy eyes and breathing problems have dissipated and his land is slowly recovering. He says the new process is "better for everybody, and for the land".

Interest in regenerative agriculture has piqued in recent years, with everyone from luxury giant Kering to fast fashion stalwart Inditex talking about, and sometimes investing in, the practice. Brands make claims ranging from increased soil health and carbon sequestration to biodiversity and farmer wellbeing. The idea that regenerative agriculture is better for the environment and people is largely undisputed, but the metrics for measuring those improvements are far from settled and concerns around execution remain.

The scientific community is yet to agree on a methodology for measuring the impact of regenerative farming practices on soil carbon sequestration, and many organisations still jostle over the definition of regenerative agriculture and its core principles.

The transition from conventional to regenerative agriculture is costly and loaded with risk, yet farmers are typically expected to shoulder the burden. A new coalition invites others to share the risk — from Reformation to Outerknown, brands are starting to bite.

By Rachel Cernansky

Farmers often take on a disproportionate burden when transitioning their farms to regenerative. The multi-year period involves significant investment, labour and risk, particularly of reduced yields, for instance. Without brand commitments, that risk is untenable for many farmers, whose finances are often already precarious and subject to the whim of the climate, market prices and other variables beyond their control. They need guarantees that the cotton they grow will be bought — and that they’ll have some amount of income if the cotton fails to grow at all, or in lower quantities than expected, during the transition period.

The history of cotton is inextricable from the history of slavery and colonialism, but the financial relationships underpinning regenerative organic cotton — brands derisk the process for farmers — have been widely associated with decolonisation and just transition narratives. Experts argue that a system which puts workers first and challenges the power dynamic in agriculture is a major step forward. "Regenerative organic is not just another certification, it can't be a transactional relationship," says Dylon Shepelsky, senior manager of product development and R&D at Los Angeles apparel brand Outerknown.

By Maghan McDowell

By Ezreen Benissan

Bergman Rivera CEO Orlando Rivera on one of the Peruvian farms the company supports.

In Peru, a clearer picture of how brands can support regenerative farms is emerging. Huallamares is one of over 300 farmers currently working with cotton production company Bergman Rivera, which has been trying to transition the country's farmland to organic and regenerative organic agriculture since 1986. In recent years, the Swedish-Peruvian company has tapped global fashion brands including Patagonia and Veja to set up cotton supply chains that it hopes can alleviate the considerable financial risks farmers take on in this transition, challenging the power imbalance in traditional supply chains and helping to scale better practices.

Outerknown — co-founded by surfer Kelly Slater and creative director John Moore in 2015 — is the latest brand to achieve a Regenerative Organic Certified cotton licence through Bergman Rivera and certifying body Regenerative Organic Alliance. Last week, Vogue Business had the opportunity to see its Peruvian cotton supply chain in person, tracing from fibre to finished product within a 610-mile radius.

By Maghan McDowell

By Ezreen Benissan

During the ginning process, the cotton fibre is separated from the seeds, sometimes on machines that date back to the Industrial Revolution, having travelled from the US or UK. The short fibres that remain on the seeds – cotton linter – are separated by hand and sold as stuffing. The rest of the cleaned cotton fibre is sent to the spinning facility in burlap bales, to avoid plastic contaminating the fibre.

Inside the Creditex spinning facility in Pisco, where the ginned cotton fibre is checked for quality and colour, shaved down and spun into tight yarn, ready to be knitted into cotton fabric.

By Maghan McDowell

By Ezreen Benissan

The cut-and-sew facility in Lima, owned by Alfredo and Lucia Guerreros, which has worked with Bergman Rivera for 15 years and exclusively with Outerknown for three. They can produce up to 15,000 garments a month, depending on complexity. Starting in Summer 2023, all ROC products Outerknown sells will be labeled with 100% Regenerative Organic Certified Cotton.

Brand support can help farmers to weather the challenges associated with transitioning from conventional to regenerative organic agriculture, which can take more than five years. They also need to invest in training for workers, and source organic compost, fertilisers and pest control methods, which many can't access without bank loans charging extortionate interest rates.

Bergman Rivera is trying to establish a new power dynamic, says Bergman Rivera CEO Orlando Rivera, flipping the financial burden so farmers face minimal risks. The company covers about 60 per cent of the upfront costs its farmers — both in transition and post-transition — need each season, essentially acting as "a small bank giving loans", he explains. Local banks might charge farmers interest of 60-75 per cent for this, he explains, but Bergman Rivera charges 12-17 per cent, mirroring what the bank charges the company. (According to Rivera, banks charge the farmers higher rates because many don't have bank accounts or legal papers to use their land as collateral.) As farmers build loyalty with Bergman Rivera, the company is able to offer them more funding and lower interest rates. Each year, 5 to 10 per cent of farmers fail to repay Bergman Rivera, either because of low yields or because conventional cotton brokers come and out-bid the company come harvest time, poaching the regenerative organic cotton to sell as conventional. "My competition is conventional cotton buyers," says Rivera. "Sometimes I end up in separate bidding wars with 200 farmers. It's very complicated."

By Maghan McDowell

By Ezreen Benissan

Bergman Rivera commits to buying the farmers’ entire harvest of cotton, which the brands commit to buying from Bergman Rivera in turn. They have the same commitment to the cut-and-sew manufacturer. If the harvest exceeds or falls short of expectations — which can happen in the event of unpredictable climate changes such as the recent floods in Peru — the commitment stands. The brand will simply pay more per kilogram of cotton so the farmers’ income remains stable, and Bergman Rivera will negotiate manageable repayment plans with the farmers who default on a case-by-case basis, recouping the upfront costs Bergman Rivera invested.

These investments and loans are funded by premiums, which the brands pay to the farmers and Bergman Rivera. The farmers take their portion as additional income, while Bergman Rivera uses its premiums to provide the compost, organic matter and training that farmers need during the transition, as well as investing in community infrastructure such as nurseries for farmers’ children.

The cotton harvest on Pedro Huallamares's farm in Chincha (left). He says there has been a notable improvement in the soil health since he has been working with regenerative organic practices, including using the compost funded by Bergman Rivera's premiums (right).

The average farmer stays with Bergman Rivera for eight years, three to five of which is usually spent in transition. Initially, Rivera saw this as a failure, before he realised that the programme was helping farmers to transition to regenerative organic agriculture, recovering the land and empowering them to invest in more expensive but profitable crops like avocados, which could take three years to grow, with no yield to sell in the meantime. "Cotton is a cash crop — you grow it and then you kill it," he explains. "The mission is not to keep farmers in cotton, but to transition them to more profitable crops which keep growing forever and can earn almost 300 per cent more profit. So, we’re constantly looking for new farmers to help transition. The core of our business is not cotton, it's the farmers’ wellbeing." Around 50 per cent of the farms Bergman Rivera has helped to transition are no longer with the programme, he estimates.

By Maghan McDowell

By Ezreen Benissan

For brands like Outerknown, the biggest challenge is how to navigate additional costs without passing the burden onto consumers, inflating its retail price and undermining its ability to compete with other brands, especially on staple items like T-shirts.

"The core of our business is not cotton, it's the farmers’ wellbeing."

"You can't just not make profit on these products because that wouldn't be sustainable," says Outerknown's Shepelsky. "We take the cost out of our sustainability budget rather than seeing it as part of the fibre cost. That way it's not passed onto the consumer, it's as if we’re investing in an audit or certification. It's a different way of thinking for our leadership."

Other brands working with Bergman Rivera operate in a similar way, with the hope that, as more brands invest and regenerative organic cotton reaches commercial scale, the premiums per brand will reduce, and consumers will have a better understanding of why prices might need to increase to support this.

Chincha-based farmer Wilmer Saldaña's farm stretches for 9.5 hectares. The farm transitioned from conventional to organic ten years ago, and again to regenerative organic three years ago, with the help of Bergman Rivera. It was the premiums that convinced Saldaña to make the transition, and he has since helped other local farmers transition through word of mouth. The process reduces the financial risk of farming, he says, but it also protects him from the synthetic fertiliser shortages that have hit many of his peers in conventional farming, because none of the regenerative organic inputs need to be imported.

Wilmer Saldaña, a farmer based in Chincha who works with Bergman Rivera and Outerknown, says he transitioned to regenerative organic agriculture for the premiums, and has since spread the practices to neighbouring farms.

By Maghan McDowell

By Ezreen Benissan

The Outerknown team aims to meet its farmers in Peru twice a year — during the planting season and again at harvest time. During its latest trip, the team visited two nurseries in Chincha, where several of its farmers and their seasonal workers send their children while they are in the fields.

Since the Outerknown pilot began, Bergman Rivera has funnelled some of its premiums into upgrading these nurseries and subsidising the teachers’ salaries. "There is always more to be done, but having these direct relationships creates an open forum where we can see and hear how the farmers want to be supported," says Shepelsky.

Regenerative organic agriculture is not without limitations. The potential for usable cotton to dwindle between farm and finished product is huge, says Shepelsky. Organic certifications are extremely strict when it comes to chemicals — if an organic farm is less than two metres apart from a conventional farm, the first two metres of plants cannot be certified. A farmer simply touching the plant after using Deet bug spray can contaminate the cotton and disqualify it from certifying as regenerative organic (something Bergman Rivera recently tested with its lab samples). Then, like any agricultural production, there are pests and increasingly unpredictable weather conditions to wrangle with.

Some of the harvest is also lost during various stages of transportation and production as well. At the gin, for instance, flyaway cotton covers the floor, nestles between machines and dangles from the ceiling beams.

"There's not much we can do as a brand to manage that waste, but we’re working with Bergman Rivera to find other uses for the waste we can gather," says Shepelsky. He points to the cotton linter — the short fibres left on the seed when the long staple cotton is removed by ginning — which could be used to stuff duvets, pillows or mattresses. The cotton seeds, which cannot be exported from Peru, might be able to find a use in the cosmetics industry, because the oil can be extracted and used for makeup bases. Within its own supply chain, Shepelsky says Outerknown is trying to minimise waste by using cotton varieties for the products that suit them, rather than trying to force a very fine fibre into a chunky yarn, for example, which requires excess shaving and twisting. "This work is very nascent right now, but we’re trying to build strategies to manage the waste."

By Maghan McDowell

By Ezreen Benissan

Bergman Rivera and its sister company Ecotton work with over 300 farmers in Peru, supporting them with the transition from conventional agriculture to organic or regenerative organic.

Outerknown is also trying to find brand collaborators outside of the apparel industry to buy the other crops that farmers produce between cotton harvests, such as maize and avocado — a practice known as crop rotation that is integral to regenerative agriculture because of its role in building soil health. This could help further reduce the financial risk for farmers, who typically plant cotton for two seasons before taking a season off to let the land recover. Other brands have ideas of how to do this: in 2012, Patagonia founded its Patagonia Provisions division, selling plant-based soups using the legumes and vegetables grown on the Regenerative Organic Certified farms it was sourcing cotton from as a way to create a market for those additional crops.

The biggest hurdle to scaling regenerative organic agriculture is getting more brands on board, says Shepelsky. "It might be a necessary evil to include fast fashion giants in this work," he explains, adding that long-term commitments are crucial. "If you just sign on once, buy a tonne of fibre, put it into one product and never do it again, it's damaging. It's important that brands understand how their actions directly impact people on the farm level." According to the 2022 Textile Exchange Organic Cotton Market Report, only 1.4 per cent of cotton grown worldwide in 2020/21 was organic, although this was up 37 per cent on the year prior.

By Maghan McDowell

By Ezreen Benissan

He argues that the benefits go far beyond environmental and social, it could also be reputational for brands. Shepelsky's own introduction to regenerative organic agriculture happened in his previous role, when supply chain transparency became a hot topic after widespread allegations of forced labour and human rights abuses in the cotton-producing region of Xinjiang in China. The close relationships with farmers that regenerative organic agriculture requires were a way to counter this, he says.

Since the US Uyghur Forced Labor Prevention Act came into effect in June 2022, thousands of shipments coming into the US have been inspected under suspicion of forced labour — 377 shipments valued at more than $159 million were inspected in April 2023 alone, according to US Customs and Border Protection — with the brands involved facing delays and fines. Now, he would like to see similar controls on organic and regenerative organic products. "The only way we’ll avoid fraud in this area is to have stricter regulations around labelling and traceability."

Right now, Bergman Rivera is in a position to choose which brands it works with, adds Rivera, but the aim is to scale and help commercialise regenerative organic practices. Rivera has his guard up to brands using the programme to greenwash. "Not many brands understand that this isn't about certification, it's about community impact and changing farmers’ lives."

Bella Webb, the author, travelled to Peru courtesy of Outerknown.

Clarification: Removes mention of Madewell, as the brand is no longer involved in Bergman Rivera's regenerative organic cotton programme. (01/06/2023)

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