Render bacon until crispy brown in skillet. Drain on paper towels and crumble. Reserve bacon fat in skillet.
For Fresh White Pearl Onions: Trim and discard the root end of the onions. Place the onions in a pan of boiling water and cook for 1 to 2 minutes to blanch, then transfer them to a bowl of ice water to stop the cooking. Pinch each onion at its stem end and it will pop out of its skin.
Heat bacon fat and 1 tablespoon butter in a skillet over medium-low heat. Add onions and cook 20 minutes, stirring or gently shaking pan back and forth occasionally.
Sprinkle sugar over onions and cook 2 minutes. Stir in vinegar and water. Cover, reduce heat to low, and cook 25 minutes. Stir in crumbled bacon and pepper to taste. Top with parsley and serve.
Notes
If you're unable to find fresh pearl onions, you can use two 14.5 oz bags of frozen pearl onions, which should be thawed and drained before using.