I was going to recommend laminating construction paper and tissue (toilet-tissue) paper or paper-towels.
First rough-up the edges of a construction paper cut-out in the shape of the standard (minus roughly 3/32nd of an inch around all of the edges save for those edges next to any attachment points) so that the construction paper has a raggedy edge that is thinner than the rest of the paper. Holes can be created in sort of the same manner by scraping or pounding on the construction paper so that the holes have a ragged edge and do not look "cut-out."
Then crumple it up a bit (this is part is mostly an art that has to be learned – I am still learning it) so that it looks like it is blowing in the wind, or from the force of the air as the standard bearer runs forward.
One way to help with this is to dampen the construction paper and drape it over the standard pole(s), crumple or shape it into the desired shape/position, and then use a blow-dryer to set the shape (with the force of the air – the fan speed – varying from high to low, and the temperature set on the hottest setting).
After this is done, then cut an oversized sheet of tissue paper that can be wrapped around both the front and back sides of the construction paper. Then coat the construction paper with a thinned mix of white-glue (Elmers glue, for instance) and water, and then carefully place the tissue-paper over the construction paper standard.
Wait for this to dry.
When that is dried, then poke out the tissue-paper in the same locations where there are holes in the construction paper (don't be "tidy" in doing this – make sure that the tissue paper remains looking raggedy and worn). When you have the holes in the tissue-paper looking right, brush on a coat of the thinned white-glue to set them in place (so they don't tear later when painting).
Then do the same thing(s) to the edges just past the edge of the construction paper. If you have worn the edges of the construction paper correctly, they should blend right into the two sections of tissue (front and back) so that the whole thing looks like one piece of cloth. When you have them looking right, again coat the edges with the thinned white-glue.
When everything has dried, then just paint as normal.
I haven't tried it yet, but one thing that was mentioned to me was to mix some paint with the thinned white-glue, and use it to paint the standard first (getting a rough pattern painted with the thinned glue-paint mixture). This will give the color a "translucent" effect that will allow the standard to have light show through it, and it will color that light (as you see in the above photos of the Orcs in what I am assuming is the Wellington NZ parade for premier of The Return of the King).
Then when that is "set" and dried, you just touch up with some highlights, or wash over it for some shading, or "stains" that might be in the standard.
This will give the standard the look of canvas or cloth when completed (I have recently been taught how to do this and the effect looks astonishing). I only have a practice standard or two finished.
I plan to use this technique for my Easterlings and Thunderbolt Mountain Goblins (I put a half-cross-bar on the Goblin Standard so that my Goblin general's standard would have a large cloth standard with either a Gundabad or a Carn Dûm banner on the standard). Maybe I will do one of each, but I would need to buy another command group.
For the Easterlings, I plan to use some Indian and Tibetan Standards as models, crossing them with some of the ideas that GW has for their standards, to create something that fits in better with Tolkien's conceptualizations of the Easterlings (not to mention putting the standards on taller poles).