For the last two-and-a-half years, denim group Citizens of Humanity has struggled with a familiar series of supply chain challenges.

The price of cotton, the key raw material for any denim company, has soared, driven higher by supply chain snarls, crop-busting weather extremes and a US ban on imports from Xinjiang (China’s largest cotton-producing region) over forced labour concerns.

To make matters worse, the organic cotton once favoured by Citizens of Humanity as the most ethical and climate-friendly option available was hit by a fraud scandal that made sourcing reliable supply particularly challenging and costly.

The group, which owns premium denim brands Agolde and Goldsign as well as cult noughties label Citizens of Humanity, wanted a better option to deliver on its sustainability ambitions. It wanted visibility over where its cotton came from and certainty that it was farmed in a socially and environmentally responsible manner.

For the Los Angeles-based denim maker, that meant turning to regenerative agriculture, an approach that aims to improve soil health, biodiversity and carbon sequestration, rather than simply reducing negative impact.

It settled on a radical solution. While most brands can barely trace their supply chain back past their first line of manufacturers, Citizens of Humanity decided to go straight to the source: cotton farms.

This year, it’s partnering with six farms across the US to procure roughly a third of its cotton for the second half of next year ― enough to make 500,000 pairs of jeans. And it’s agreed to front the cost, budgeting as much as $1 million extra for its cotton this year.

“We were all used to the word ‘organic’ and thinking that was better for people... we were excited to better understand what actually could improve the earth,” said Citizens of Humanity chief executive Amy Williams. “We were willing to pay for that.”

The Rise of Regenerative Agriculture

The concept of regenerative agriculture is increasingly mainstream in fashion. While there is no clear-cut definition of the term, it encapsulates an holistic approach to farming that aims to work with and restore nature, rather than trying to control it.

Companies including Kering and Ralph Lauren have committed millions to support broader adoption, embedding it into their sustainability commitments. But making the transition is expensive, time consuming and complicated. What works on one farm, may not work on another, and there’s no one-size-fits-all solution. Most projects are still in the pilot phase.

The challenge isn’t that regenerative farming techniques are radically new. On the contrary, they often reflect traditional farming techniques.

However, practices like minimising or avoiding tilling, planting crops and grazing livestock to help naturally fertilise fields aren’t typically deployed in modern industrial agriculture. Many farmers are skittish about investing to change the way they operate, while forgoing crop-boosting synthetic fertilisers and pesticides.

To support farms in making the transition, Citizens of Humanity has contracted directly with farmers to source its cotton, agreeing to pay a premium for their product and guaranteeing volumes. It’s a fundamental shift in the way the industry operates and will need to become much more common to help embed regenerative practices at scale.

“We can often be put under a banner of being snake-oil salesmen,” said Kish Johnson, national sales director at Advancing Eco Agriculture, a regenerative agriculture system that is working with Citizens of Humanity. “It’s huge to have a brand partner.”

An Unconventional Business Model

Citizens of Humanity is better placed than most brands to embark on such an overhaul.

The group is vertically integrated, manufacturing most of its products in its own sewing and laundry facilities in Los Angeles and Turkey. The unusual structure gives it closer ties deep in the supply chain than many competitors, plays into its premium price positioning and underpins its focus on quality and craftsmanship, all of which support its decision to invest in its raw-material supply chain.

The company is also privately owned, following a management buy-out from private equity backers in 2017. Sales have grown more than 80 percent in the last four years, reaching more than $160 million in 2021. In the seven months to July, they grew another 21 percent, putting the group in a position of strength and independence to make bold bets in pursuit of its sustainability agenda.

Even so, directly sourcing cotton is a complicated process.

Typically mills, where cotton is woven into denim, source raw material from a number of different places with little engagement with brands that eventually end up using the fabric they produce. Usually they won’t know themselves details of where the cotton is farmed, buying from intermediaries like traders to help hedge pricing and production risk.

For its regenerative cotton programme to work, Citizens of Humanity had to find a denim mill willing to change that practice and accept cotton directly from the group’s farm partners. Luckily, it was something Turkish denim manufacturer Orta Anadalu, one of the group’s long-term suppliers, had been looking at for some time.

“We are really on the same page,” said Orta Anadolu sustainability director Sedef Uncu Aki. “We need to join forces together to do this more effectively and faster.”

Still, the unconventional sourcing approach also passes supply chain risk upwards in a way that brands don’t usually have to manage. Contracting a farm to grow raw material means committing to volumes at the point of planting, well before most companies will have begun to design for the season when the fabric will be used. As a denim brand that will always use a lot of cotton, Citizens of Humanity can reasonably take that call, but going direct to the farm also means the brand takes on exposure to climate and crop failure risk.

“It’s definitely more complex and more stressful,” said Williams. The executive is used to worrying about things like inventory management and sourcing, now if there’s no rain in West Texas she worries how her cotton crop is doing.

From Farm to Fabric

For most of the last decade, Marshall and Mead Hardwick have been growing cotton on their family farm in Louisiana. They were already deploying many techniques associated with regenerative agriculture, but when a local spinning mill put them in touch with Citizens of Humanity, it presented an opportunity to expand and deepen their efforts.

The denim company agreed to pay the Hardwicks a premium to plant cotton on 500 acres of land and subsidised the cost to certify the farm under a regenerative agriculture standard. It also underwrote a project to test out and compare AEA’s system against the Hardwick’s normal practices on a 40 acre plot, guaranteeing to pay for at least 40,000 pounds of cotton regardless of the actual yield.

“The traditional way is to turn to us and say, ‘farmers y’all change and y’all do it,’ and we’re supposed to do it for free because it’s the right thing to do,” said Mead Hardwick, speaking from an office on the family farm. “If brands and retailers want to really put their money where their mouth is, they should be willing and able to offer premiums to farmers to help them do these practices.” Outside his window, about 100 metres away, cotton was growing that could be in a pair of jeans by the second half of next year.

Citizens of Humanity has similar partnerships of varying sizes in place with farms in Mississippi, California and Texas.

In Mississippi, the company was introduced to farmer Trentis Allen by his cousin, the artist Theaster Gates. This year, Allen will grow 25 acres of cotton for the company using AEA products and methods, receiving a premium for every pound produced and guaranteed payment for at least 25,000 pounds of cotton.

It’s the first time Allen’s family farm has grown cotton in nearly 20 years, and though the project is currently small it holds historic significance and represents a much bigger opportunity, Allen said.

“I’m a minority farmer... probably the only minority farmer to grow cotton in the area,” Allen said. “It’s very rare what we’re doing.”

Business Values

This year’s efforts are just the beginning. By 2024 Citizens of Humanity is aiming to source 70 percent of its cotton from regenerative farms, building on its current partnerships and expanding to projects closer to its mill in Turkey.

It’s a tricky proposition at a time of mounting inflation, but the group is aiming to offset the costs with efficiencies elsewhere to avoid passing the price on to consumers.

It expects the investment to pay off in other ways, appealing to sustainability-minded shoppers and giving the company real insight into its supply chain as transparency and traceability become more important and regulators step up scrutiny of the industry.

“It isn’t what drove us to do it, but I think [it is] a competitive advantage,” said Williams, acknowledging the group’s long-term perspective doesn’t fit with fashion’s modern business model.

“I worked at Gap, and there was a great deal of pressure to constantly grow as opposed to constantly show value,” said Williams. “You have to understand your own brand… values and just work to deliver on them.”

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