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Sophie Benson
Not as simple as saying yes to a new supplier and applying for certification, the Outerknown team had to get in on the ground, meet with farmers, commit to local manufacturing, develop new yarns, and embed themselves within the community. There's no doubt about it, regeneration has become a buzzword but on a recent visit to Peru, Outerknown showed us what it looks like in practice.
As our Pioneers series highlights, innovation is often the result of a singular vision inspiring collective action and development. In the case of Outerknown, that vision came from Dylon Shepelsky, Senior Manager of Product Development and R&D at the brand, who was part of the team heading to Peru in May 2023. Shepelsky had previously worked on an ROC cotton project with another brand that ultimately didn’t come to fruition. Stepping into his new role at Outerknown in 2021, Shepelsky wanted to reignite the project with a new brand and see it through.
Financially and commercially, it wasn’t an easy sell to the leadership team. Shepelsky was asking the brand to invest in a more expensive fibre that there was really no consumer demand for yet, so he had to bring it back to Outerknown’s core sustainability pillars: "embrace circular models, design with intention, support suppliers, champion fair labour".
“Outerknown is a Fair Labour Accredited brand, so for us the natural progression was to go from organic to regenerative organic because that certification covers a portion of fair labour. The way we positioned it was: we don’t have a fair labour or fair trade programme at the factory level in Peru, so what can we do there to achieve that goal?” says Shepelsky. Outerknown gave the green light but that was just the first hurdle.
Shepelsky hoped to run the programme with the same partner he’d worked with before: Bergman/Rivera. The Swedish-Peruvian family-owned company’s history of producing and promoting organic cotton in Peru runs back to 1986. It was the first Latin American company to be certified under GOTS, and it is the third organic cotton producer in the world to become Regenerative Organic Certified under the Regenerative Organic Alliance.
At the time Shepelsky approached Bergman/Rivera, the company was only producing one organic cotton product for Outerknown: its bestselling Sojourn Tee, and it wouldn’t be enough to simply convert that to ROC. Committing entire factory outputs or entire crops to a single product line is a high risk move for suppliers because if a brand pulls that line, the economy built around it collapses.
Outerknown expanded its Peruvian output, initially working with Bergman/Rivera to develop an ROC cotton yarn and production line for its high volume selling Groovy Tee to show intent, before committing even more product lines in August 2022, including knits, polos, and Henley shirts. This was a vital investment to demonstrate a secure future for local growers and manufacturers, and provide a dependable ROI for the farmers who would transition their fields to regenerative.
Bergman/Rivera shoulders a lot of responsibility for its growers. For instance, it sells seeds to farmers, but those seeds are financed, and the money isn’t recovered until nine months later when the crop is delivered. Many farmers don’t have access to traditional financing options, and when they do interest rates are set at around 75%. Bergman/Rivera bridges that gap, charging 8-10% interest, only what the bank charges it. It increases funding and lowers interest rates as farmers build a history of repayment, but repayment isn’t guaranteed. Each year 5-10% of farmers don’t pay their loans back, instead selling their crop to cotton merchants who drive from farm to farm offering quick cash for ROC cotton and then selling it as conventional. In 2023, because of heavy rains, it’s estimated that defaults will be as high as 50%. Bergman/Rivera effectively acts as a bank for farmers, says CEO Orlando Bergman.
The company also provides free organic humus (created just metres away from an ancient Incan temple) which costs PEN 480 (USD 120) per tonne, and assists with other costs such as investing in machinery, developing organic chemical-free pesticides, and supporting community nurseries. Given all that risk, brand partnerships are chosen very carefully. “We’re looking for partners that will see value in our products. We filter our clients. We’re not trying to grow exponentially, we’re trying to grow as slowly as we can afford to,” says Bergman.
While Bergman is looking to grow slowly, Outerknown moved fast to put its ROC cotton programme in place and demonstrate its commitment. Alongside Kristen Arville, supply chain and sustainability leader at Outerknown, Shepelsky built the extended line plan for Peru within the space of a week in early August 2022. By the end of that month, the team received confirmation that the fields they were to source the cotton from had been certified by the ROA. This isn’t the norm. There is usually a two-to-three-year conversion period between organic and regenerative organic – longer between conventional and regenerative - and any brands looking to move towards ROC should be prepared for such a wait. But in this instance, thanks to the farmers using practices which were, Shepelsky says, “unique to the region”, the farms were, for all intents and purposes, already farming regeneratively and could reap the rewards for their efforts sooner.
As we covered in our Intelligence piece, Regenerative Futures, regenerative practices are “grounded in soil”. Soil holds the key to so many vital functions for life on earth: the ability to grow food, biodiversity, flood defence, carbon storage. As intensive industrial agriculture reliant upon high chemical inputs became status quo, our soils began to degrade. Driven by government subsidies and globalised buyers seeking maximum yields, farmers tilled soils again and again, breaking apart vital organic structures and mycelial links; they practiced mono-cropping to maximise profit, which robbed the soil of specific nutrients without ever returning them; they sprayed fields with chemicals suppressing natural ecological systems and balances; and they left soil exposed after harvest leading to erosion and the depletion of nutrients.
Regenerative farming seeks to put back what’s been lost using practices including cover cropping, crop rotation, low- to no-till, composting, rotational grazing, and zero use of chemical pesticides and fertilisers. It’s land stewardship rather than resource extraction.
“The difference is soil management. Soil management is different to organic and conventional. For organic you need to stop using pesticides and fertilisers, but in regenerative you’re doing innovation like no tillage, incorporation of organic soil matter, and measuring soil health,” says Elmer Tuñoque, a farmer in Lambayeque who grows ROC cotton used by Outerknown. The amount of labour, he says, is the same, but farmers must keep a close eye on their soil health and appearance.
It can be difficult to spot the difference between a conventional cotton field and a regenerative one - most of the differences occur at the planting stage - but there are signs if you know where to look. As we wandered through the humid fields of a farm in Chincha, it was pointed out that the leaves of the cotton plants were dotted with holes, nibbled by bugs because they weren’t sprayed with chemical pesticides. Instead, farmers take a more targeted approach, planting crops like corn and rosebushes that attract natural predators to pests which attack the cotton crop itself. Anything harmless is left to to thrive. On other farms, some farmers intercrop with avocado and peanuts in order to keep the balance of nutrients in the soil, while others use bottles of molasses tied to canes to trap bollworms, notorious pests that feed on fruiting cotton crops.
While there are some visible clues, talking to the farmers is where you discover the real differences between growing conventional and regenerative organic cotton. Tuñoque was one of the farmers who was already carrying out nearly all the regenerative practices before the transition, meeting 45 of the 50 practices required by the ROA. Although it’s been a relatively short period of time since becoming certified, he has already noticed the appearance of bugs that are beneficial for biological pest control.
Wilmer Saldaña, who owns a farm in Chincha and works on the farm with his wife and children, is reassured by having what he calls a “clean field” without any fertilisers or pesticides. His peers in the local region have experienced itchy eyes and coughs but as an organic, then regenerative organic farmer, Saldaña says he can be confident about the health and safety of those on his farm.
Pedro Huallamares, another farmer in Chincha, grew conventional cotton before transitioning to organic and then onto ROC two years ago. He says he decided to make the change because “you don’t contaminate the land, it’s better for everybody.” Previously he had breathing difficulties from using conventional practices, and now he sees a clear difference in his health.
A further tangible benefit for farmers is the extra income and financial security that growing ROC cotton provides. Maize, avocados, peanuts, and other intercrops can all be sold, providing other revenue streams throughout the year. In addition, Outerknown pays a premium for ROC cotton. This year, Bergman says, the premium for organic cotton is about 10-15% on top of the price of conventional. The premium for ROC is then another 10-15% more on top of that. It covers the cost of the humus, the loss on the third year when farmers aren’t growing cotton due to the crop rotation that ROC practices necessitate, certification fees, and other sometimes unexpected factors that are intrinsic to the regenerative growing cycle. For instance, when the burning of dry shrubs at the end of harvest was prohibited, Bergman/Rivera bought a grinding machine that allowed farmers to grind the branches and incorporate the organic matter back into the soil.
As well as paying the ROC cotton premium, Outerknown makes a commitment to pay the price of the full crop, even when climate change-related weather events means that a portion of it is lost to the elements. In April of this year, the north of Peru was subjected to both a cyclone and unprecedented rainfall, resulting in harvest losses of around 30-35%. This could be a financial disaster for farmers, but Shepelsky explains that in such cases Outerknown pays more per unit so that the total payment to the farmer is still the same.
"I'll be very honest," says Shepelsky, "when I started this work at my previous job, it was actually about transparency. The focus was not on the practice itself, but on the fact it enabled us to get down to the farm level...at the time that the Xinjiang issue arose. My ideal was to find a cotton programme that meant I didn't need a blockchain or an RFID chip. I came across the regenerative organic certification, and [I saw it as] an approach that's focused not only on farmers, but also on the source of the fibre. That was my driving factor."
"I realised that what's even more incredible [about regenerative farming] is when you actually understand what certification stands for. It’s fair labour, the farmers are supported, the farmers get premiums they can send where they choose. And then the other part is soil health restoration. I think maybe five, six, seven years ago, it was not in our vocabulary to think of a regenerative system. We were so conditioned to take, take, take, but never give back. And this is not only giving back to the people, but giving back to the soil," he continues.
It’s simply too early to say what the environmental benefits of Outerknown’s ROC cotton programme are but tests are regularly carried out for CO2 retention, the nutrients in the soil are measured, the volume of moisture that can be retained in the soil is tested, and the soil composition is tested too. Bergman says that the amount of organic matter within soils has grown from 1% to 2.5% in the space of two years.
Elsewhere, there are positive signs that could well be echoed in Outerknown’s programme. As covered in Regenerative Futures, PepsiCo reduced on-farm GHG emissions by 38% by working with farmers to plant cover crops. The Sustainable Markets Initiative states that regenerative farming on 40% of the world’s cropland would save around 600 million tons of emissions (equivalent to the footprint of Germany), while other studies have found that insect predation on caterpillars, a significant farmland pest, increased from 25% to 75% over three years of conversion from conventional to regenerative farming. Olam Agri helped increase average cotton yields from 671kg/ha to 765kg/ha in Togo by promoting low-till practices, while in an update for its regenerative barley farming pilot, launched February 2022, Guinness says the soil has absorbed a significant amount of nitrogen, phosphorus, and potassium through cover cropping and that the “carbon footprint of growing spring barley across [its] participating farms is lower than other international studies”.
In 2020/21 organic cotton represented just 1.4% of all virgin cotton produced. ROC cotton represented less than 0.01%. It has a miniscule market share globally, but at the time of our visit to Peru in May around 10-15% of Outerknown’s overall range was regenerative organic. That was on the cusp of doubling due to the introduction of new styles, and all Outerknown product that comes from Peru now falls under the regenerative organic category. But the brand is expanding further. In spring 2024 Outerknown is starting a project in India to transition its woven tops and bottoms to ROC certified. The range will include products like poplin shirts and military trousers, but to expand the brand will likely need to work with other brands because the quantities of cotton needed for the lines may not be big enough to convince a farmer to make the transition. If Outerknown only needs an acre’s worth of cotton, for instance, there’s little incentive, but if three or four brands can pay the premium for a whole crop and make a multi-year commitment, then the advantage becomes much clearer. Bergman/Rivera counts other brands like Patagonia and Veja amongst its clients, so Outerknown can tap into that existing demand in Peru, but starting afresh in a new region means demand has to be built from the ground up.
Aside from the programme in India, Outerknown’s next big goal is transitioning its bestselling Blanket Shirt to ROC. That, Shepelsky says, would be “the true unlock” because the style sells at such high volumes that the brand could scale a ROC project itself. The challenge there is not the demand, but because Outerknown doesn't work with industrial growers, it would be finding enough small-scale farms to convert to produce the volumes needed.
There would also need to be a conversation about cost in future. Currently, because Outerknown’s ROC programme is relatively small, the brand absorbs the cost as a “research fee” but when it scales there is a question of “do we pass it onto the consumer, or do we continue to absorb it?” says Shepelsky. From scaling to the specifics of the environmental benefits, there are unknowns coming down the line to be reckoned with, but there are plenty of certainties too: the farmers are healthier, have security, and earn more money, the social ecosystem around the cotton farming is supported by the premiums, and in bringing the project to life in such a hands-on manner, Outerknown can tell its audience the regenerative story and begin to build the necessary demand.
"I have to say, to see where it has come in two years is emotional for me because it's coming off of a previous project that I didn't get to close out. Being able to close it out in a way that it penetrates so much of our assortment feels good. It feels like we did it right. We didn't just hit one product, we had a category, we had a region. And now we're proud to say that anything that comes out of Peru will fall into the regenerative organic certification," says Shepelsky. "For me, it's actually seeing that we are making a change and that we are changing the attitudes of the people at our company, saying this is something we stand for."
