10. The reason behind this decision is because the majority of literature, even in Brazil, regarding gender and sexuality issues focuses on the aforementioned individual. However, I also had to choose initiatives that already have a solid impact in Rio, and, in a few cases, they were owned/organised by cis gay men.

11. Campkin, Ben. "Queer Urban Imaginaries." *The Routledge: London* (2018): 408; Natalie Oswin, "Planetary Urbanization: A view from outside." *Environment and Planning D: Society and Space, 3 November,* (2016).

12. Weightman, Barbara. "Commentary: towards a geography of the gay community." *Journal of Cultural Geography* 1, 106–12, 1981.

13. Castells, Manuel. "The city and the grassroots". Berkeley, CA: University of California Press, 1983.

14. Binnie, Jon and Gill Valentine. "Geographies of Sexuality - a Review of Progress." Progress in Human Geography 23 (2): 175–187, 1999.

15. Ibid., 183.

16. Binnie, Jon and Gill Valentine. "Introduction." In Bell, D. and Valentine, G., editors, Mapping desire: geographies of sexualities, London: Routledge, 1–27, 1995b.; Binnie, Jon.  Environment and Planning." D: Society and Space 15, 223–37, 1997a.

17. Oswin, Natalie. "Critical Geographies and the Use of Sexuality: Deconstructing Queer Space." Progress in Human Geography 32, no. 1 (February 2008): 89–103, DOI: 10.1177/0309132507085213.;  Antipode 38, 885–93, 2006a.

18. Facchini, Regina. "Múltiplasidentidades, diferentesenquadramentos e visibilidades: umolhar para os 40 anos do movimento LGBT." In História do Movimento LGBT no Brasil, ed. James Green, Renan Quinalha, Marcio Caetano and Marisa Fernandes (Sao Paulo: Alameda, 2018): 311–330.

19. Oswin, Natalie. "Planetary Urbanization: A view from outside." Environment and Planning D: Society and Space, 3 November: 540–6, 2016; Lefebvre, Henri. O direito à cidade. São Paulo: Moraes, 1991.

20. Crenshaw. Kimberle. "A intersecionalidadenadiscriminação de raça e gênero." In Cruzamento: raça e gênero, edited by UNIFEM (Brasília: UNIFEM, 2004).

21. Crenshaw, Kimberle. "Intersecionalidade."

22. Magliano, Maria José. "Interseccionalidad y migraciones: potencialidades y desafíos." *RevistaEstudosFeministas*, v.23, n.3 (2015): 691–712.

23. Foucault, Michel. "Of other spaces: Utopias and Heterotopias." *Diacritics* 16: (1986): 22–27.

24. Ibid., 23.

25. According to Foucault, a word of Greek origin (heteros: the different and linked to the word alter (the other) and topia meaning place, space).

26. As an example, Foucault explains that some colonies in the 17th century were founded as perfect other places; such as the Puritan societies established in the U.S. by the English or the Jesuit colonies in South America, which were strictly regulated in every aspect of their daily lives.

27. Ibid., 24.

28. The University of Sao Paulo.

29. USP, 2009.

30. Diego Santos Vieira De Jesus."Só para o moço do corpo dourado do sol de Ipanema: distribuiçãoespacial da economia noturna LGBT nacidade do Rio de Janeiro." Revista Brasileira de EstudosUrbanos e Regionais (RBEUR), v. 19, n. 2, (2017): 288–309.

31. By infrastructure, I mean public transportation, basic sanitation, better offer of services and goods.

32. Miskolci, Richard. "A Teoria Queer e a Sociologia: o desafio de umaanalítica da normalização." Sociologias ano 11, n°21, 2009, pp.150–182.

33. De Jesus. "Corpo dourado."

34. Ibid., 301.

35. Gontijo, O Rei Momo, 13, owntranslation.

36. Ibid.

37. Gontijo, O Rei Momo.

38. Ibid., 16.

39. Gontijo, O Rei Momo. 40. De Jesus. "Corpodourado."

41. Ibid.

42. Even if all these LGBTQ+ spaces are within another context other than the Global North, as this thesis title implies, there are also other spaces (other than the nocturnal ones) even within other contexts, such as in Rio.

43. In order to make this table, the more complete answers with full sentences were chosen.

44. Cisnormativity is a discourse that assumes that being a cisgender person is the norm.

45. Source: own elaboration based on survey answers.

46. Source: own elaboration based on survey answers.

54. For further information on the LGBTQ+ movement in Brazil and its waves, please read the following article: Facchini, Regina. "Múltiplasidentidades, diferentesenquadramentos e visibilidades: umolhar para os 40 anos do movimento LGBT." In História do Movimento LGBT no Brasil, ed. James Green, Renan Quinalha, Marcio Caetano and Marisa Fernandes (Sao Paulo: Alameda, 2018): 311–330.

**Section 2: Global Dynamics/Social Scene & Human Sustainability: Understanding That the Whole Always Informs the Local**

## **5. In Response to the Refugee Crisis: How Social Enterprises in Germany Foster Integration**

*Based on the thesis "The Evolution of Social Enterprises in Germany: Analysing Social Innovations after the Refugee Crisis"*

*Hua, Yu-Po*

#### **Introduction**

Over the last two decades, there has been a spate of attention on social enterprises (SEs) and social entrepreneurship due to their innovative solutions for social challenges. While the complex and uncertain repercussions confront the public sector and traditional NGOs, the existing system demands more innovative, sustainable and efficient solutions.1 The refugee crisis is one of such pressing challenges. In Europe, Germany as the major destination for refugees represents a particular case. The country's social services system was overwhelmed by the massive influx in 2015. As a result, SEs that used to be hindered under the discussion emerged to support the urgent needs and the later on long-term integration in society. This research, therefore, draws upon case studies with eight SEs that address refugee inclusion in Germany. By analysing social innovations delivered by these German SEs, we discover how they respond to the refugee crisis and what common elements they possess to explore the bigger picture of SEs' developments under global challenges.

#### **1 The European refugee crisis & the social constructionist**

The refugee crisis is considered one of the most pressing global-scale challenges over the last decade. In 2015, up to 65.3 million people were displaced worldwide,2 reaching the highest peak since World War II.3 A total number of 1,282,690 people sought asylum in the European Union (EU),4 with more than 80% from countries in conflict or wars, including Syria, Afghanistan, Eritrea and Iraq.5 Although the topic of migration and refugees is not new to Europe, the massive exodus in 2015 threatened the continent's solidarity and each nation's domestic system. It was "a defining moment"6 and led to the European Refugee Crisis. Among the 28 EU members, Germany held a rather welcoming position under chancellor Merkel's famous expression "Wir schaffen das (We will manage that)."7 It received up to 890,000 refugees and 441,900 asylum claims.8 Nevertheless, the intense and urgent demands from the immense number of arrivals challenged the state and its social welfare system to provide more efficient and adequate support.

The overwhelming situation prompted the welcome culture (Willkommenskultur) in Germany and various actors from the civil society to fulfil the niches. 9 Social entrepreneurs incorporated social aims, leveraged entrepreneurial means, developed SEs and mediated crosssector co-operations for refugee inclusion.10 They identified the gaps and took actions toward surfacing problems when other actors failed to tackle rapid challenges or maintain original services due to their limited organisational capacities.11Two groups of German SEs emerged in this context, including the social economy organisations that adopted entrepreneurial approaches and the new type of SEs(the Anglo-Saxon model)promoted by the global trend of social entrepreneurship. They echo the type of social entrepreneurs, "Social Constructionist",12 who address societal problems that existing institutions cannot sufficiently resolve.

Before the refugee crisis, the absence of political agendas and the initial social services system long hindered the development of German SEs. Under the conservative welfare regime, the government takes most of the responsibilities in providing social services.13 Furthermore, the socio-economic structure of the "social market economy" based on agreements between the state and contract providers makes it even harder to identify the roles of social entrepreneurs.14 However, this does not mean that the phenomenon of SE is entirely new. Instead, various organisations have adopted entrepreneurial approaches to address emerging social needs.15 According to a cross-dimension analysis of German SEs, the predecessors date back to the end of the 19th century.16 There were instances such as philanthropists who addressed the societal effects caused by a society's transition, the early voluntary welfare associations and co-operatives, and the alternative organisations derived from "the self-help, the women's and the ecological movements."17 These past events show how challenges can shape the development of SEs. Similarly, the refugee crisis provides a background and incentives that motivate the Social Constructionists to develop and implement entrepreneurial and innovative means.

#### **2 The definition of social enterprise & social innovation**

Before diving into the case studies of German SEs and their innovations, it is necessary to provide an overview of the terminology. Since the definition of SE is still an ongoing debate, it varies according to the development of each region or country. The North American and the European traditions are major examples. The contrast between them lies in the different perspectives of innovation. While the former prioritises novel business strategies and individual traits under the market economy, the latter focuses on innovations in existing infrastructures and collective movements in the social economy.18 Although definitions vary, most of them consist of three fundamental factors: social motivations, economic activities and relationships with key stakeholders. Social motivations are the aims that are associated with social value creation. Economic activities are "[the] ability to leverage resources to address social problems."19 In one instance, this is "providing goods and services that the public sector or market is unable to provide or foster pathways to integrate socially marginalized groups."20 Finally, the last factor refers to the relationships established with key stakeholders in the process.

Since Germany falls under the European context, our research also embraced the indicators from the European Commission's Social Business Initiative (SBI) and the EMES network.21 They both focus on three dimensions that coincide with the three fundamental factors mentioned above, the social, the economic and entrepreneurial, and the inclusive or participatory governance.22 Additionally, since Germany has no specific legal forms as with the UK's Community Interest Company, SEs can operate under both non-profit and for-profit organisation forms, such as registered associations (eingetragener Verein, e.V.) and limited liability company with public benefit status (gemeinnützige Gesellschaft mit beschränkter Haftung, gGmbH). Therefore, our definition includes the new type of SEs and organisations from the social economy sector, which incorporates the viewpoints from the North American and European traditions. It corresponds to the "enterprising social innovations" framework, which "focus on the social entrepreneurs who carry out innovations that blend methods from the world of businesses and philanthropy to create social value that is sustainable and has the potential for large-scale impact."23

Drawing on previous definitions and the above reasons, we define SE in this research as *an organisation, regardless of its operation form, which puts social missions at its core and pursues the social aims with entrepreneurial and innovative approaches. In addition, its economic activities and the relationships between stakeholders serve as the means for pursuing their main societal goals.* In other words, the core value of social mission and the innovative approaches is what defines SEs. Since the economic activities only serve as the means, we excluded businesses that consider maximising profit as their primary motive. This definition is demonstrated under the hybrid spectrum (see Figure 1) with the German SEs sitting on the left side of this. They are practitioners who are motivated by social mission; their incomes are reinvested in social projects and operation; and are accountable to stakeholders rather than shareholders.24 It also stresses the entrepreneurial and innovative approaches, which are the main characteristics identified in German SEs.

Figure 1: The hybrid spectrum25

Another essential term in this research is social innovation. Similar to the case of SE, most definitions of social innovation differ but share three elements: the intention, the practice and the impacts. The intention refers to the goal to address societal problems; the practice implies new ideas, including new or changed concepts, products, services, organisation models or stakeholder relationships; and the impacts are outcomes that are dedicated to the wellbeing of individuals and the society. The OECD's and EU's working definitions are examples specifically pointed out as our research focuses on Germany, which is under both frameworks. In the OECD's definition, social innovation "seeks new answers to social problems… [it] implies conceptual, process or product change, organizational change and changes in financing, and can deal with new relationships with stakeholders and territories."26 The EU's definition aligns by stating that "social innovations are new ideas that meet social needs, create social relationships and form new collaborations. These innovations can be products, services or models addressing unmet needs more effectively."27

Social innovation can represent a broad range of activities. With social value as the central purpose, it differs from other innovations because it is motivated by societal challenges rather than exploiting the markets or maximising profit. When associated with social entrepreneurship, it indicates "new and more effective approaches"28 that turn challenges into opportunities and create social value. It is a "new combination of delivering new goods or services and delivering old goods or services in a novel way,"29 as stated in SEs' "enterprising social innovations" framework. Meanwhile, it also showcases the process of "connecting demand and supply, and to find the right organizational forms to put the innovation into practice."30 Therefore, our definition of social innovation includes two kinds, the establishment of an SE or the innovative approaches developed by the SEs. Applying this two definition to our research setup: "SEs after the refugee crisis in Germany", social innovation refers to *1. the transformation towards new types of SEs* or *2. the implementation of innovative approaches from German SEs that support integration in society.*

#### **3 German social enterprises & their innovations**

Innovation is a defining characteristic found in German SEs. According to the EU's country report, the German context implies a greater emphasis on social innovation compared to other EU members.31 The main reason behind this is the lack of innovation in the country's original social services system, which requires supplementation from other actors. SEs are one of these actors who implement alternative approaches for societal improvements and act as intermediaries to support social services delivery in Germany.32 Representative research stated that German SEs are highly innovative; around 88% out of 107 SEs "introduced at least one new or significantly improved product, service or process" in 2015.33 The latest "Deutscher Social Entrepreneurship Monitor" published in 2019 also pointed out that up to 87.3% of German SEs reported a market novelty.34

Social innovations experienced tremendous growth after the 2015 refugee crisis, especially the ones dedicated to integration. Since integration covers a wide range of dimensions and complexity, which the traditional systems or methods are inadequate to solve, it led to an increase in SEs and their social innovations. These findings are highlighted by the international supporting networks of SEs, such as Ashoka, Schwab and Social Impact. Furthermore, the government also recognised such growth and the importance of SEs in Germany. The Federal Ministry of Labour and Social Affairs (Bundesministerium für Arbeit und Soziales, BMAS) pointed out that SEs' innovations for integrating refugees into the job market and the society represents the development of new ideas and innovative business models.35A similar finding from the Federal Ministry for Family Affairs, Senior Citizens, Women and Youth (Bundesministerium für Familie, Senioren, Frauen und Jugend, BFSFJ) reported that the huge influx of refugees increased civic engagement and generated many innovative activities, including new concepts of social economy developed under the initiative of SEs.36

Previous discourse on German SEs, however, only identify their innovative capacities and characteristics; further analysis of actual innovative approaches remains vague. This research, therefore, is dedicated to providing further evidence and fill the gap by presenting and investigating social innovations developed by SEs. In addition, German SEs' engagements in integration offer a specific circumstance and a framework for analysing the process of social innovations and its association with SEs' evolution after societal challenges. In the following section, I've chosen eight German SEs and categorised them under four different models of social innovations regarding integration, including *Community Building*, *Economic Integration*, *Digital Solution* and *Complementary System*. 37 The three former types are promising models for refugee integration identified in earlier studies, while the concept of the *Complementary System* is discovered and defined through this research.38

#### 3.1 Community building: Über den Tellerrand & Refugio

The model of Community Building emphasises the engagement in the local communities through leisure activities and daily life. Some SEs in this model also adopted the co-living idea to bring different groups of people together. By creating an open and safe space, they provided opportunities for members of the society to engage with each other, leading to mutual understanding, and building up identification and connections. Although activities such as gardening, language exchange, sports clubs or cookery programmes are informal, they create direct contacts between society members rather than impressions from the media or imagination. Daily routines and encounters also help establish social relationships and personal connections, which form the basis for breaking down prejudices. Another notable feature is that "they help refugees build social ties, access new information, pick up cultural codes, and feel appreciated and valued."39 By being a part of the community, refugees feel more comfortable and gradually rebuild their self-confidence towards a new life. *Über den Tellerrand* and *Refugio* are examples of community building.

#### *Über den Tellerrand: "make the world a better plate"*

*Über den Tellerrand* is translated as "Thinking Outside the Box" and interpreted as "looking beyond the edge of the plate." 40 It implies that when people look beyond their horizon, they can learn from each other. As one of its mottos states, "when you have more than you need, build a longer table, not a higher fence"; the SE believes that personal encounters are the key to a more diverse and open society.41 Therefore, they dedicate themselves to creating spaces and events that enable everyone to understand each other and further contribute to integration and social participation: "We create neutral spaces and make the places of encounter beautiful, inviting, and loving so that nothing stands in the way of getting to know each other."42 The SE also shares the belief that "food has this unique power to connect us all, and the table is that magic field where we can look at each other, eye level, no matter our backgrounds, and allow the magic of dialogue to happen."43 Through the simple acts of cooking, eating and sharing, everyone is invited to cocreate a sense of community and a table of delicacies.

#### *Refugio: "a truly lived utopia"*

*Refugio* is a six-floor shared/open house in Neukölln in Berlin. Instead of a normal shelter, it provides a space of refuge and a sense of community to people "who have lost their homes or were forced to flee", and also anyone who shares the same vision of community and cohesion.44 The first two floors of the house include a café and the main hall for conferences, concerts, movies and events; the middle floor serves as studios and incubators for artists and SEs; the three upper floors are equipped with private rooms for 40 residents, and finally, there is a garden on the rooftop. The residents in *Refugio* share the kitchen and communal spaces, they organise community life, operate the café, exchange ideas with each other and further connect with the surrounding neighbourhoods and people around the world.45 Just as *Refugio's* introduction indicates, "a shared house is a garden in which unique talents and dreams can blossom, a community in which everyone is equally important. A shared house is a workshop for heavenly society."46

#### 3.2 Economic integration: Social-Bee & SINGA Business Lab

Since the German government strongly emphasises refugee integration in the labour market, a special unit with experts from the Federal government was formed to "speed up the procedures of requests for asylum and integrate refugees into the labour market" back in 2015.47 However, the task of matching labour supply and demand requires overcoming barriers and complexity such as languages, soft skills, cultural training and paperwork, which are the reasons that prevented companies from hiring refugees in the first place. Therefore, this type of social innovation acts as an intermediary between employers and employees. Some provide refugees with programmes to improve German proficiency, obtain professional skills, develop career plans or make job applications. Others introduce entrepreneurial programmes to involve refugees and migrants in the start-up scene, where they can apply their ideas and skills, and help foster innovations in society. Most importantly, these approaches not only support economic inclusion but also aim to create meaning and enhance participants' self-esteem through the process.48*Social-Bee and SINGA Business Lab* are two examples of this model.

#### *Social-Bee: "a model for sustainable integration"*

*Social-Bee* aims to support refugees and migrants to integrate successfully and sustainably into the labour market. They believe that "every life matters and with every job we create perspective and promote a colorful society".49 Through the model of temporary work (Zeitarbeitsmodell), refugees are first employed and trained by *Social-Bee* and then further matched to permanent positions in companies from 1 to 1.5 years. They provide "full-service integration and personnel service" including the selection process of candidates, language training, job preparation and work culture mentoring.50 The model offers support for both the supply and demand side of the labour market. They equip refugees with abilities for long-term economic inclusion, while for businesses they remove the obstacles to hiring motivated and professional workers.51

#### *SINGA Business Lab: "bring ideas in motion"*

SINGA takes its name from the word meaning "connection" in the Lingala language spoken in Congo. It started as a citizen movement in Paris that "aims to build bridges between people to change perceptions about refugees and asylum seekers" and "create opportunities for engagement and collaboration between refugees and their host society."52 Later on, the movement expanded into an international organisation. In Germany, SINGA Deutschland was founded in 2016. They carried out activities and created spaces for exchanging ideas and experiences, and implemented innovative solutions for an inclusive society.53 *SINGA Business Lab* under SINGA Deutschland was the first inclusive incubator in Germany that was co-created together with newcomer entrepreneurs and focuses specifically on their needs. They provide a five-month start-up incubation programme to support refugees to build up their own businesses. Through the idea of co-creation, the lab "brings newcomers, local entrepreneurs, business experts, academics, start-up communities, and professionals from a variety of fields to build bridges and foster innovation in the society."54

#### 3.3 Digital Solution: Kiron Open Higher Education & Digital Career Institute

Digital Solution is the combination of social and technological innovation. They respond rapidly to challenges and are not restricted by borders. SEs under this model make use of information and communication technology to design projects that "go beyond simply providing information about themselves."55 They are the main contributors to the rapid growth of digital refugee projects in Germany from September to October 2015.56 The projects are further divided into three categories: providing information about local services, linking resources to demands and participating in education, training or job matching.57 Among them, providing learning and training opportunities is especially highlighted as integration in the labour market requires solutions that can overcome barriers in languages, educational backgrounds or special skills.58 Meanwhile, due to the shortage of information technology (IT) experts in the market, participation in digital jobs has also become the most promising and rapid way for refugee integration.59 *Kiron Open Higher Education* and the *Digital Career Institute* represent this model.

#### *Kiron Open Higher Education: "learning beyond limits"*

*Kiron Open Higher Education* provides accessible education for refugees and underserved communities through a free online learning platform. The SE "believes that everyone has an equal right to access and succeed in higher education" and that "empowerment through education can change lives, transform communities, and build bridges."60 They offer programmes through massive open online courses (MOOCs) from partner universities and Open Educational Resources (OERs). This includes hardware, software, internet connection to access courses and also psychological support and tutorials for students.61 They also offer programmes on language and career developments to prepare students with the required knowledge and skills for job seeking. Through MOOCs and their partnerships with universities, the SE empowers students to achieve personal and academic growth. Most importantly, with digital innovation, they filled in the gap in providing high-quality education for refugees, boosted the digitalisation of education and provided a new way to access education.

#### *Digital Career Institute: "developers and refugees"*

The *Digital Career Institute* started with the project "Devugees", which stands for the combination of Developer and Refugees. It aims to help integrate refugees into the German labour market through obtaining technology qualifications and fill up the gap in high-demand positions in the technology field. Started in September 2016, they first worked as a government-subsidised training programme (Weiterbildungsträger), which focuses on training refugees who are interested to become a developer in coding, programming, website or software. During the oneyear programme, they also provided language training, visit tours to technology companies and a three-month internship. As one of the participants pointed out, "in the IT industry, they give you the opportunity to get a job not based on what you can say, but what you can do."62 Indeed, as the start-up scene and technology field are both actively recruiting digital experts, it provides a point of entry for integration.63 Today, despite supporting refugees, DCI has also developed into a coding school and is "committed to training anyone who wants to pursue a tech career."64

#### 3.4 The Complementary System: Zubaka & Flüchtling Magazin

The Complementary System, as the name suggests, is a model of social innovation that functions as a supplement for the existing systems. The social entrepreneurs who initiated such innovations used to work in the system and possess knowledge in that specific field. They are aware of the complexity and limitations of the system when facing pressing challenges; therefore, they act as a complement to support it. By doing so, they not only target a specific theme but also deal with other potential disadvantages caused by the system's deficiencies. Although they cannot change the system immediately, they develop an approach that could, later on, replace and change the status quo. *ZuBaKa*, for instance, tackled the problems in the education system which affected the refugee children and also other vulnerable students. *Flüchtling Magazin* noticed the lack of diverse voices within the media sector and started a new platform for improvement.

#### *ZuBaKa: "toolbox for the future"*<sup>65</sup>

*ZuBaKa – der Zukunftsbaukasten* is translated as the future toolkit, referring to the SE's social mission in building a modular education system to support refugee or migrant students. The SE identified the problems in the intensive class for these students that has been provided for more than 25 years in the German education system. It consists of students from different countries, ages and learning levels, which results in difficulties in supporting the starting point of each individual. Therefore, through different building blocks in the modular course, *ZuBaka* offers a complement to the existing structures by providing programmes and working closely with schools. The SE accompanies the students through their entire school year and develops tailored programmes according to the school's and student's needs. The support further improves both the learning conditions of the students and helps relieve the pressure on the teachers. In addition, they connect the students with other social institutions to enable the new arrivals to successfully integrate into the local community. Their main goals are to "improve their language skills, self-consciousness, empower them by giving them the resources that they need to become active, and develop their potential in society."66

#### *Flüchtling Magazin: "from people, with people, for people"*<sup>67</sup>

*Flüchtling – Magazin für multikulturellen Austausch* stands for the idea of multicultural exchange and understanding. The magazine emphasises that there is no homogeneous group called "refugees". Refugees are not just terrorists or poor people who are looking for help, but also people who are "authors, journalists, and students."68 They believe that respectful and constructive discourse can help reduce the fear and prejudice toward refugees. Therefore, the magazine serves as a platform where people from different countries or cultural backgrounds write about their opinions and thoughts on integration and experiences living in Germany. The magazine publishes online four times a week, including interviews, stories and portraits of refugees or articles written by refugees on the topics of culture or society. With openness and diversity, it intends to create more dialogues in society. The magazine itself also lives up to its goals. With the editorial team consisting of diverse ethnic groups, they bring their own stories to the magazine and work together to bring positiveness to society. "The important thing is that we discuss with each other and publish about all these different people in the common language, which is German."69

#### **4 Analysing the evolution of German social enterprises**

German SEs adopted different models of social innovation as mentioned in the previous section; nevertheless, we identified shared concepts and patterns in fostering integration which demonstrate their evolution. As social innovation and SE both emphasise the social aspects and follow the stage from perceiving problems, conceiving solutions to operating and scaling methods, we analyse their innovative approaches under the following three themes: the novel concepts, the novel solutions and the novel operations.

#### 4.1 Novel concepts: newcomers & integration

The first stage of social innovation is identifying challenges and the target groups. This research discovered that SEs share the consensus that refugees who entered Germany, despite different reasons and situations, are a part of the society and should be treated equitably. They used the term "newcomers" instead of refugees, which helps reduce prejudice. As *SINGA Business Lab*  puts it, "[…] why we choose to use the word "newcomer"– it is not about being politically correct and replacing the word "refugee", but to recognize the experience and agency of each person and reframe the migration discussion."70 *Flüchtling Magazin* also holds a similar viewpoint,"the word refugee is only a description of their situation. It is only like a legal form or the reason why they are here, but what the people do and how the people are is very different. […] people are from different cultures, obviously different countries, also very different stories, and they are all here in Germany, trying to build a new life, and it is important to break down these prejudices against refugees."71

The change of mindset also led to novel concepts regarding integration. Redefining the term "integration" was critical to SEs, as *ZuBaKa* pointed out, "[…] already the word integration. What does that mean?[…] Do we try to make them fit into a system? Is it like a mutual thing or is it more like one side has to try to fit in? So, that is something I think is a very old-fashioned way to look at integration, which is still very present in places, I will say."72 As mentioned earlier, migration is not a new topic in Germany. It can be traced back to the 1950s with the recruitment of foreign guest workers and grants for asylum seekers.73 However, the government has mostly viewed it as a temporary matter. It was only in 2005 that the Immigration Law came into effect and was followed by the 2016 Integration Act due to the refugee crisis.74 The policies and measures performed the principle of support and demand; nevertheless, they still heavily emphasise the old concept of fitting a person into the system.

The old style of concepts and services has discouraged the integration process. As *Refugio* pointed out, "most of these places (refugee centers) are provided by the government. And of course, it's many more people in one place, a few hundred, which makes it difficult to integrate into German society, because you don't actually have to, you can stay in your place and speak your own language and you are not forced to take part in anything unless you really want to. And also there are a lot of rules and regulations and security in the front door and things that don't make life easier, and I think the basis for this is still, yes, you are a refugee, you are very welcome, but it is not on the same eye level."75*Flüchtling Magazin* also highlighted that the system ignored the exchanging opportunities between different communities during the migration in the 1960s. "[Back then] people came mostly for work, they sort of maintained their own societies or communities, and because of that, because there was so little exchange at the time […], there was no sort of dialogue (austauschen). There was no exchange and that has led to more misunderstanding."76 Furthermore, the "discussion on integration is often dominated by political parties, the police and the judiciary, experts, and the administration,"77 whereas refugees and migrants themselves rarely have a say.

SEs reflected on the previous problems with integration by consolidating the old principles and new perspectives. They advocate different attitudes for achieving integration, as *Refugio* stated, "the fact that people with great skills and rich cultural treasures flee to Germany is not a crisis, but an opportunity. We need each other more than we know."78 SEs believe that instead of demanding one specific group to integrate into the system, it is essential for different groups to participate in the discussion and exchange. SEs highlight the potential of the newcomers and the importance of mutual engagement. They demonstrate that different perspectives can contribute to new solutions and support the society's needs. After all, the reconstruction of the discourse is a continuous social task and holds up a mirror for everyone to reflect on each other.

#### 4.2 Novel solutions: the structural approach

Novel solution found in SEs is the structural approach that distinguishes them from public actors, traditional social service providers or other NGOs. With the structural approach, SEs address unmet social needs by establishing an alternative structure instead of simply reacting to specific problems. They tackle societal challenges through targeted but systematic angles and are more flexible to changes. As *ZuBaKa* pointed out, "we are often asked to support big companies or institutions to bring innovation into their system […] we are very flexible, very fast to work with new work elements."79*Kiron Open Higher Education* also stated, "the universities, of course, have programs, but they are always bound by the higher education law in their state […] We create the necessary flexibility."80 Most significantly, the structural approach is comprehensive and considers other stakeholders who are also affected by the issue. These features enable SEs to replicate and scale up their solutions and achieve the ultimate goal of systematic change. For example, *Über den Tellerrand'*s "Kitchen on The Run" created space for cultural exchange and also motivated students who constructed the container kitchen to "reflect on their roles as architects in shaping social coexistence."81 The following paragraphs elaborate the structural approach in each SEs.

*Über den Tellerrand*, for instance, started from a cookbook, yet later on transformed into a comprehensive project, which includes cooking classes, language exchanges, volunteering events and workshops. Their project "Kitchen on the Run" advanced regular cooking events through a mobile kitchen that could reach different cities and countryside areas in Germany and Europe. These projects were not innovations themselves, but they showcased the innovation to apply new ideas into existing services and products. *Refugio* addresses housing problems and further creates an open environment for the newcomers. By making full use of multi-cultural elements, it evolved into a community centre that reaches out to people throughout the neighbourhood and even abroad. Both Community Building models are successfully replicated and currently applied in different regions and countries. They redefine the concept of integration and help develop exchanges between the members in the society and beyond.

The Economic Integration model supports society members who are in search of jobs or start-up opportunities. *Social-Bee*, for instance, breaks down the main components in the jobseeking process. Besides training, they designed a comprehensive programme that satisfies both the newcomers and employers. In the long term, they aim to "give even more people fair access to the labor market and, ideally, revolutionize the temporary employment industry in a social way.[…] We also do not rule out expanding the target group to include other disadvantaged groups."82*SINGA Business Lab* leverage the existing international and diversity dynamics in the Berlin start-up scene. With the five-stage entrepreneurial programme, they provide an innovative way to integrate the newcomer entrepreneurs and at the same time enable the start-up community to flourish. The programme can adapt to challenges easily since it is co-designed with newcomers who directly face the problems in the German market.

The Digital Solution model utilised digital tools to provide accessible education services. *Kiron Open Higher Education* recognised how residence status and language skills disrupt the education process for many newcomers. Therefore, they blended online and offline courses, so students can continue with their studies once obtaining their legal status and earn a degree from partner universities. "Digitization means that we go beyond the thinking of nation-states and regional borders, network what already exists and work together."83*Digital Career Institute*, on the other hand, was approved by the government to provide vocational training in the public job centre. Their coding programmes benefit the newcomers and as well support other disadvantaged and unemployed members of the society, which demonstrates the core value of the structural approach.

The Complementary System model represents the structural approach the most. Instead of being a typical refugee project, *ZuBaKa* addresses the deficiencies in the initial education system. It remains important even if the society or the funding partners shift their focus toward other target groups. The current COVID-19 crisis is such proof. While traditional NGOs suffer from financial burdens and operation difficulties, *ZuBaKa* received even more support because they can react rapidly by adding new structures on their original module. "We can just react to what's going on in our environment, that's something special. And that's something our partners are really happy about."84*Flüchtling Magazin* first worked as a platform where refugees could share opinions and further developed into a space for dialogue between different communities in Germany. They also utilised social media to build up an online community with audiences, writers and other magazines to reach out to more countries that are tackling the same issue. The SE's structural approach benefits the society as a whole by leading further systematic change. This solution also led to the SE's novel way of operating, which is further explored in the next section.

#### 4.3 Novel operations: collaboration & the intermediary role

The German SE's novel operations are demonstrated in their collaborative characteristic and the intermediary role. As SEFORÏS pointed out, "the collaborative attitude towards other social organizations is a defining feature of German social enterprises."85 They establish relationships with non-profit organisations, corporations, SEs, national government and social welfare organisations to support the implementation of innovative solutions. Co-operative activities range from funding, co-designing and developing projects to recruiting volunteers. For instance, the Community Building model collaborates with other associations and NGOs in carrying out transcultural projects. The Economic Integration models showcase partnerships through delivering programmes with different actors, including entrepreneurs, small and medium-sized businesses and DAX corporations. Digital Solution models implement innovative ideas and scale up their projects through co-design methods and public funding. The Complementary System models collaborate closely with the stakeholders in the initial system to identify the needs, adapt to changes and develop an alternative structure.

SEs also serve as intermediaries that play a significant role in the social innovation scene. They address the "notable absence of intermediaries that can connect demand and supply, and find the right organizational forms to put the innovation into practice."86 This can be explained on three different levels. First, SEs operate as intermediaries between newcomers and society when tackling integration. For instance, the Community Building model develops spaces and events that engage different communities. The Economic Integration model works as agencies to connect newcomers, employers and the labour market. The Digital Solution models develop the platform between traditional education and MOOCs which help newcomers to access education and obtain skills. The Complementary System model works collaboratively with stakeholders and builds bridges between newcomers and the original system.

Second, SEs transform innovative ideas into actual practices by initiating an organisation or building connections between existing organisations. This echoes the view that social innovation is also "the initiation of social enterprise, an enterprise with social objectives, an organization pursuing social objectives or to empower [them] with a more participatory governance system."87 In this research, half of the eight SEs adopted the gGmbH form (limited liability company with public benefit status), the other three adopted e.V. (registered association) and one gUG (limited liability entrepreneurial company). During the interview, one of the three e.V.s is considering transforming into a start-up status. While e.V. is one of the most common forms found in non-profit social services providers, gGmbH corresponds closely to the new type of SEs and gUG represents the smaller version (lower capital) of gGmbH.88 Depending on the social objectives, all three forms are commonly adopted by German social entrepreneurs. Nevertheless, the current tendency toward gGmbH reflects the trend and evolution in operation.

The third level of the SE's intermediary role is to connect the social economy with the development of social innovation. Since German SEs derived from both the civil society and the new trends of entrepreneurial methods, their organisation form overlaps with the social economy, the third sector and the business realm. Previous studies identified "the strong connection between social economy organizations and social innovation but lack the proof to analyse the particular ground."89 SEs and their social innovations in this research presented evidence for that ground. In other words, social innovation is connected with the tradition of the social economy through SE's intermediary role. In the meantime, social innovation is also the engine that boosts German SEs' evolution. It transforms them from organisations that simply provide social services into system changers who create new equilibrium in society and for society.

#### **Conclusion**

German SEs foster integration by carrying out different models of social innovations. Despite their various methods, they share common evolution in response to the refugee crisis. First, SEs' alternative perspectives regarding newcomers and integration showcased their mindset of equality, diversity, engagement and empowerment. Instead of only helping newcomers like other social services providers, their novel concepts led to new solutions. They carried out the structural approach that notably represents the vision of systematic change and SEs' adaptability and flexibility when facing urgency or changing conditions. This can be detected in the 2015 refugee crisis and the recent COVID-19 pandemic. Third, German SEs emphasise collaboration in their operation. By tightening up partnerships with stakeholders, they function as intermediaries that convert innovative ideas into actual practices to pursue further changes.

From a broader viewpoint, this research provided additional evidence for understanding how global challenges and pressing demands in the original system affect the development of SEs. The European refugee crisis was a specific background in Germany, which motivated existing SEs and new start-ups to develop various innovations. This echoes the statement of Social Constructionists that SEs emerge when other actors are not capable of meeting societal needs. By analysing social innovations implemented through German SEs, we discovered how they evolved to address challenges. By including both the social economy organisations and the new trends of social entrepreneurship, social innovation connects with the tradition of the social economy and the business realm. This also led to insights into the role of SEs and provided different approaches and aspects for future research.

There are also limitations to this research. Although the refugee crisis was a representative case, other challenges such as climate change, unemployment or the COVID-19 pandemic should also be examined for additional proof about the evolution of German SEs. In addition, while our findings show that German SEs have a strong connection with the social economy and the new trends of social entrepreneurship through social innovations, the phenomenon does not necessarily apply to all other countries. Further study should consider variables such as the type of challenges, the country's welfare regimes, civic culture and the size of the social economy.

To sum up, by analysing social innovations implemented by German SEs after the refugee crisis, we revealed their evolution when addressing global challenges. We lay the foundation for the new intersection of social economy, social entrepreneurship and social innovations to develop. For the practical field, we presented examples and experiences of how SEs contribute to fostering integration. The novel perspectives, the structural approach and the intermediary role are valuable elements that can be transferred to and adopted by other areas. While integration is a lengthy process of dialogue and reconstruction, SEs continue to lead our way to systematic change with their core value in social responsibility. In the end, we all hope to evolve and contribute to a better world.

#### **Notes**

1. Nicholls, Alex. "Introduction." In *Social Entrepreneurship: New Models of Sustainable Social Change*, edited by Alex Nicholls, 1–35. Oxford: Oxford University Press, 2006.

2. UN. *International Migration Report 2015: Highlights (ST/ESA/SER.A/375).* New York: United Nations, Department of Economic and Social Affairs, Population Division, 2016. https://www.un.org/en/development/desa/population/migration/publications/migrationreport/docs/MigrationR eport2015\_Highlights.pdf.

3. UNHCR. *Global Trends Forced Displacement In 2015.* Geneva: United Nations High Commissioner for Refugees, 2016. https://www.unhcr.org/576408cd7.pdf.

4. eurostat. "Asylum statistics- Number of asylum applicants (non-EU-27 CITIZENS), EU-27, 2008-2019." Accessed July 8, 2020. https://ec.europa.eu/eurostat/statistics-explained/index.php/Asylum\_statistics.

5. Clayton, Jonathan. "Over one million sea arrivals reach Europe in 2015." *UNHCR.* December 30, 2015. https://www.unhcr.org/news/latest/2015/12/5683d0b56/million-sea-arrivals-reach-europe-2015.html.

6. Stated by António Guterres, head of the UN refugee agency. Clayton, Jonathan. "UNHCR chief issues key guidelines for dealing with Europe's refugee crisis." *UNHCR*, September 04, 2015. https://www.unhcr.org/55e9793b6.html.

7. Die Bundesregierung. "Sommerpressekonferenz von Bundeskanzlerin Merkel [Summer press conference of chancellor Merkel]." August 31, 2015. https://www.bundesregierung.de/bregde/aktuelles/pressekonferenzen/sommerpressekonferenz-von-bundeskanzlerin-merkel-848300.

8. See note 2. UN. *International Migration Report 2015: Highlights (ST/ESA/SER.A/375).*

9. Neis, Hans Joachim, Briana Meier and Tomoki Furukawazono. "Welcome City: Refugees in Three German Cities." *Urban Planning* 3, no. 4 (December 2018): 101–115.

10. Mair, Johanna, Miriam Wolf and Alexandra Ioan. *Germany Country Report: A first analyses and profiling of social enterprises in Germany*. Berlin: SEFORÏS. 2016. p.26.

11. Engelke, Henning, Stefanie Mauksch, Inga-Lena Darkow and Heiko von der Gracht. "Heading Toward a More Social Future? Scenarios for Social Enterprises in Germany." *Business & Society* 55, no.1 (January 2016): 56–89.

12. Zahra, Shaker A., Eric Gedajlovic, Donald O.Neubaumc, Joel M.Shulmand. "A typology of social entrepreneurs: Motives, search processes and ethical challenges." *Journal of Business Venturing* 24, no. 5 (September 2009): 519–532.

13. Esping-Andersen, Gøsta. *The Three Worlds of Welfare Capitalism.* Cambridge: Polity Press, 1990.

14. Defourny, Jacques and Marthe Nyssens. "Social enterprise in Europe: recent trends and developments." *Social Enterprise Journal* 4, no. 3 (September 2008): 202–228.

15. Bornstein, David and Susan Davis. *Social Entrepreneurship: What Everyone Needs To Know.* Oxford: Oxford University Press, 2010. p.2.

16. Zimmer, Annette and Katharina Obuch. "A Matter of Context? Understanding Social Enterprises in Changing Environments: The Case of Germany." *VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations* 28(July 2017): 2339–2359.

17. Roth, Roland and Dieter Rucht. *Die sozialen Bewegungen in Deutschland seit 1945*. Frankfurt: Campus Verlag, 2008. Referenced in Annette Zimmer and Katharina Obuch, "A Matter of Context? Understanding Social Enterprises in Changing Environments: The Case of Germany." 2339–2359.

18. Nicholls. "Introduction."

19. Dacin, Peter A., M. Tina Dacin and Margaret Matear. "Social Entrepreneurship: Why We Don't Need a New Theory and How We Move Forward From Here." *Academy of Management Perspectives* 24, no. 3 (August 2010). p.38. 20. Smallbone, David, Mel Evans, Ignatius Ekanem and Steven Butters. *Researching Social Enterprise***:** *Final Report to the Small Business Service.* Great Britain: Small Business Service, 2001. p.18.

21. EMES is the acronym of the French title of its first research project, "*L'EMergence de l'EntrepriseSocialeen Europe"*  (The emergence of social enterprises in Europe) completed between 1996 and 2000.

22. European Commission. *A map of social enterprises and their eco-systems in Europe: Synthesis Report.* Luxembourg: Publications Office of the European Union, 2015. p.9.

23. Dees, J. Gregory and Beth Battle Anderson. "Framing a Theory of Social Entrepreneurship: Building on Two Schools of Practice and Thought." In *Research on Social Entrepreneurship: Understanding and Contributing to an Emerging Field,* edited by Rachel Mosher-Williams, 39–66. Indianapolis: Association for Research on Nonprofit Organizations and Voluntary Action, 2006. p.50.

24. Alter, Kim. *Social Enterprise Typology.* Wilmington: Virtue Ventures LLC. 2007. https://www.globalcube.net/clients/philippson/content/medias/download/SE\_typology.pdf. p.14. (Adapted from Etchart, Nicole and Lee Davis, "Profits for Nonprofits," NESsT, 1999.)

25. Alter, Kim. *Social Enterprise Typology.* Figure drawn by the Author.

26. OECD. "Social Entrepreneurship and Social Innovation." In *SMEs, Entrepreneurship and Innovation.* OECD Studies on SMEs and Entrepreneurship, 185–215. Paris: OECD Publishing, 2010. https://doi.org/10.1787/9789264080355-en. p.196.

27. European Commission. "Social Innovation." Accessed June 15, 2020. https://ec.europa.eu/growth/industry/policy/innovation/social\_en.

28. European Commission. *Social Innovation A Decade of Changes*. Luxembourg: Publications Office of the European Union, 2014. p.14.

29. Dees and Anderson, "Framing a Theory of Social Entrepreneurship: Building on Two Schools of Practice and Thought." p.50.

30. OECD. "Social Entrepreneurship and Social Innovation." p.198.

31. European Commission. *Social enterprises and their ecosystems in Europe: Country report Germany.* Luxembourg: Publications Office of the European Union, 2018*,* 31–33.

32. Mair, Johanna. "Social Entrepreneurship: Research as Disciplined Exploration." In *The Nonprofit Sector: A Research Handbook*, 3rd Edition, edited by Walter W. Powell and Patricia Bromley, 333–357. California: Stanford University Press. p. 348.

33. Mair, Wolf and Ioan. *Germany Country Report: A first analyses and profiling of social enterprises in Germany*. p.26.

34. Scharpe, Katharina and Michael Wunsch. *Deutscher Social Entrepreneurship Monitor 2019*. Berlin: SEND Social Entrepreneurship Netzwerk Deutschland e.V., 2019. https://www.send-ev.de/uploads/DSEM2019.pdf. p.24.

35. "Antwort der Bundesregierung auf die Kleine Anfrage der Abgeordneten Kai Gehring, Dr. Thomas Gambke, Beate Walter-Rosenheimer, weiterer Abgeordneter und der Fraktion BÜNDNIS 90/DIE GRÜNEN ", Deutscher Bundestag 18. Wahlperiode, January 19, 2017.

36. Klie, Thomas, Anna Wiebke Klie and Silke Marzluff. "Second Engagement Report 2016: Demographic Change and Civic Engagement: Civic Engagement and its Contribution to Local Development." Federal Ministry for Family Affairs, Senior Citizens, Women and Youth. 2016, 24–25.

https://www.bmfsfj.de/blob/115598/e737186a9375c1dde5c49b2e393f6fe5/zweiter-engagementbericht-2016-- monitor-englisch-data.pdf.

37. The selection of the social enterprises are based on six criteria set up in this research, including 1. Accordance with the time frames, 2. Addressing the topics of refugee integration, 3. Identified social innovation, 4. Creating meanings between stakeholders, 5. Incorporatation of Information and Communication Technologies, 6. Media and information coverage.

38. Patuzzi, Liam, Meghan Benton and Alexandra Embiricos. *Social Innovation for Refugee Inclusion: From bright spots to system change*, 8–14.

39. Patuzzi, Liam, Meghan Benton and Alexandra Embiricos. *Social Innovation for Refugee Inclusion: From bright spots to system change*, 14.

40. Hua, Yu Po. Interview with Branch Manager of Über den Tellerand. "New Developments of German Social Business in Response to the European Refugee Crisis: Case Study of Social Business in Frankfurt am Main". MA thesis, National Taiwan University, 2018.

41. Über den Tellerrand."Über den Tellerrand." Accessed July 15, 2020. https://ueberdentellerrand.org/.

42. Über den Tellerrand. "Über uns— UNSERE ERFOLGSREZEPTE." Accessed July 15, 2020. https://ueberdentellerrand.org/ueber-uns/.

43. The aim of the global network: Social Gastronomy Movement, consists of local communities that use the power of food to create social change. Mirella Ferraz, "How a restaurant born at the Olympics has strengthened the "social gastronomy" movement, " *Shareable*, February 20, 2019. https://www.shareable.net/how-a-restaurant-born-at-theolympics-has-strengthened-the-social-gastronomy-movement/.

44. SHAREHAUS: Werkstatt für himmlische Gesellschaft. "refugio." Accessed July 16, 2020. https://sharehaus.net/refugio/.

45. REFUGIO. "Über uns." Accessed July 16, 2020. https://refugio.berlin/ueber-about/ueber-uns.

46. SHAREHAUS: Werkstatt für himmlische Gesellschaft. "Gemeinschaft. "Accessed July 16, 2020. https://sharehaus.net/.

47. The Federal Government: Chancellor. "Preparing refugees for the labour market." September 18, 2015. https://www.bundesregierung.de/breg-en/chancellor/preparing-refugees-for-the-labour-market-428870.

48. Patuzzi, Benton and Embiricos. *Social Innovation for Refugee Inclusion: From bright spots to system change*, 9–11.

49. Social-Bee. "Selbstverständnis." Accessed July 17, 2020. https://www.social-bee.de/ueber-uns/.

50. "Integration durch gemeinnützige Zeitarbeit." Social-Bee. Accessed July 17, 2020. https://www.social-bee.de/.

51. Social-Bee. "Selbstverständnis." Accessed July 17, 2020.

52. SINGA France. "QUI SOMMES-NOUS ?" Accessed July 17, 2020. https://www.singafrance.com/presentation.

53. SINGA Deutschland. "Vision." Accessed July 17, 2020. https://singa-deutschland.com/en/home-en/

54. Schmeiss, Jessica. "Co-Creating an Innovative society with newcomer entrepreneurs." *Alexander von Humboldt Institute for Internet and Society, DIGITAL SOCIETY BLOG.* December 06, 2017. https://www.hiig.de/en/newcomerentrepreneurs/.

55. Mason, Ben, Lavinia Schwedersky and AkramAlfawakheeri. *Digital Routes to Integration: How Civic Tech Innovations Are Supporting Refugees In Germany.* Berlin: better place lab, 2017*.* p.13.

56. Mason, Schwedersky and Alfawakheeri. *Digital Routes to Integration.* p.19–21.

57. Benton, Meghan and Alex Glennie. *Digital Humanitarianism: How Tech Entrepreneurs Are Supporting Refugee Integration.* Washington DC: Migration Policy Institute, 2016. p.3–14.

58. Stated in the previous section "Economic Integration: Social-Bee & Social Impact Lab."

59. Mason, Ben. *TTech Jobs for Refugees: Assessing the potential of coding schools for refugee integration in Germany*. Brussels: Migration Policy Institute Europe, 2018. p.3–4.

60. kiron. "What we do." Accessed July 18, 2020. https://kiron.ngo/en/about-us/.

61. Wegner, Julia. "A University Education for All Refugees." *tbd\*.* February 10, 2017. https://www.tbd.community/en/a/university-education-all-refugees-kiron.

62. Rhoades, Alison. "Devugees Welcome: One company's mission to integrate refugees through technology." *LOLA.* Accessed July 19, 2020. https://lolamag.de/feature/human-interest/devugees-welcome/.

63. Wirtschaft Woche Gründer. "Devugees: Berliner Initiative gegen Fachkräftemangel in der Tech Szene." April 26, 2017. https://gruender.wiwo.de/devugees-berliner-initiative-gegen-fachkraeftemangel-in-der-tech-szene/.

64. Digital Career Institute. "About us." Accessed July 19, 2020. https://digitalcareerinstitute.org/about-us/.

65. The data for this section were collected and synthesised from the interview and the official website: https://www.zubaka.de/.

66. Meister, Anna (Founder of ZuBaKa). Interviewed by the author. July 20, 2020.

67. The magazine changed its name to Kohero on August 30, 2020, after the interview. Kohero in Esperanto means cohesion. It continues with the idea as the platform on the topics of migration and social coexistence. Changing the name signifies that from now on they write for everyone because there is no longer us as refugees or you as Germans, but all people living in the German society. The data for this section were collected and synthesised from the interview and the official website: https://www.kohero-magazin.de/frage-und-antwort-reisen-mitfiktionsbescheinigung/.

68. Al Zaher, Hussam (Founder of Flüchtling Magazin). Interviewed by the author. June 4, 2020.

69. Hussam. Interviewed by the author.

70. Boegli, Nadia. "Setting Ideas in Motion: A new business incubator that focuses on newcomer entrepreneurs and their needs." *tbd\*.* March 22, 2017. https://www.tbd.community/en/a/setting-ideas-motion.

71. Al Zaher, Hussam (Founder of Flüchtling Magazin). Interviewed by the author. June 4, 2020.

72. Meister, Anna (Founder of ZuBaKa). Interviewed by the author. July 20, 2020.

73. Kohlmeier, Manfred and Peter Schimany. *The Impact of Immigration on Germany's Society.* Nürnberg: Federal Office for Migration and Refugees Migration and Integration Research Department, 2005. https://ec.europa.eu/homeaffairs/sites/homeaffairs/files/what-we-do/networks/european\_migration\_network/reports/docs/emnstudies/illegally-resident/de-finalstudy-eng\_en.pdf.

74. Hanewinkel, Vera and Jochen Oltmer. "Integration and Integration Policies in Germany." Bundeszentrale für politische Bildung. January 12, 2018.

https://www.bpb.de/gesellschaft/migration/laenderprofile/262812/integration-and-integration-policies-ingermany#footnode2-2.

75. Pass, Anna (Conductor of Refugio). Interviewed by the author. July 16, 2020.

76. Al Zaher, Hussam (Founder of Flüchtling Magazin). Interviewed by the author. June 4, 2020.

77. Hestermann, Thomas. "Refugees and Migrants in the Media: The Black Hole." In *Refugees and Migrants in Law and Policy: Challenges and Opportunities for Global Civic Education*, edited by Helmut Kury and Sławomir Redo, 125–136. New York: Springer, 2018.

78. Al Zaher, Hussam (Founder of Flüchtling Magazin). Interviewed by the author. June 4, 2020.

79. Meister, Anna (Founder of ZuBaKa). Interviewed by the author. July 20, 2020.

80. Visser, Corinna. "Interview: Kiron University – Zwei Berliner gründen eine Uni für Flüchtlinge." *Berlin Valley.*  October 2, 2015. https://berlinvalley.com/kiron-university-interview/.

81. Hans Sauer Stiftung. "KITCHEN ON THE RUN." Accessed August 5, 2020. https://www.hanssauerstiftung.de/projekt/kitchenontherun/.

82. Clarke, Charlotte. "Interview Mit Sarah Schilberg Von Social-Bee: Startup Social-Bee Ermöglicht Geflüchteten Die Integration In Den Arbeitsmarkt: Wir Möchten Die Zeitarbeitsbranche Auf Soziale Art Und Weise Revolutionieren." NachhaltigeJobs.de. July 10, 2019. https://www.nachhaltigejobs.de/startup-social-beegefluechtete-arbeitsmarkt/m.

83. Visser, Corinna. "Interview: Kiron University – Zwei Berliner gründen eine Uni für Flüchtlinge."

84. Meister, Anna (Founder of ZuBaKa). Interviewed by the author. July 20, 2020.

85. Ioan, Alexandra, Miriam Wolf and Johanna Mair, "Study Finds that German Social Enterprises Lead in Collaboration and Innovation."*tbd\*.* January 1, 2018. https://www.tbd.community/en/a/study-finds-german-socialenterprises-lead-collaboration-and-innovation.

86. OECD. "Social Entrepreneurship and Social Innovation." p.198; NESTA. *Innovation in Response to Social Challenges*. Policy Briefing SC/03. (London: NESTA Policy & Research Unit, 2007). https://media.nesta.org.uk/documents/innovation\_in\_response\_to\_social\_challenges.pdf.

87. Bureau of European Policy Advisers. *Empowering people, driving change: Social innovation in the European Union.* Luxembourg: Publications Office of the European Union, 2011. p.31. Cited from Jacques Nussbaumer and Frank Moulaert, "L'innovationsociale au cœur des débats publics et scientifiques". In *L'Innovationsociale,*ed. J.-L. Klein and D. Harrisson (Québec: Presses de l'Université du Québec, 2007), 71–88.

88. The gUG also pursue a non-profit business purpose. 75% of the profits must be used for charitable and 25% of the profits are retained to increase the share capital of the gUG until converted into a gGmbH. "Die gUG (haftungsbeschränkt): ein gemeinnütziges Unternehmen mit wenig Geld gründen." FürGründer. Accessed July 17, 2020. https://www.fuer-gruender.de/wissen/existenzgruendung-planen/recht-und-steuern/rechtsform/gug/.

89. TEPSIE. *Social Innovation Theory and Research: A Guide for Researchers.* Brussels: European Commission, DG Research, 2014. p.18.

## **6. The Ali Enterprise Inferno: Global Production Chains and Social Accountability Audits**

*Based on the Master's dissertation "Dual Pressures of Pakistan's Political Economy and Global Garment Value Chains on Industrial Labour"*

*Pasha, Syed Saad Ali*

#### **Introduction**

This chapter explores how the global production process is shaped by the relationship between Transnational Companies (TNCs) and local actors. Specifically, this chapter explores how neoliberal reforms and the transnationally organised garment industry created conditions leading to the major industrial disaster at the Ali Enterprise in Karachi in 2012. This chapter brings into conversation extensive literature on the political economy of global value chains, and by analysis of a specific event, the Ali Enterprise inferno investigates the events that shaped the responses at both ends of the buyer-driven value chain. The research relied on currently accessible material relating to the relevant court cases in Pakistan and Germany, where the principal buyer of Ali Enterprises, KiKTextilien, is located. Analysis of reports from civil rights organisations and strategic litigation firms, which played a key role following the inferno, as well as newspaper and media reports between 2012 and 2020, were used to structure and chronologically present how the case evolved.

Taking up a line of argument developed by IntanSuwandi in her book, Value Chains: The New Economic Imperialism, this chapter emphasises the extreme hierarchies inherent in buyerdriven value/production chains that gives TNCs control over the production process while minimising their liability for risks and social costs. The chapter points out the fundamental importance of "Global Labour Arbitrage" as the rationale underlying these value chains thereby exacerbating levels of exploitation. The contextualisation of Pakistan's political economy is based on Hamza Alavi's notion of Pakistan as an "Overdeveloped State" where state apparatus has historically overpowered social and non-state actors. Regarding industrial relations, the defining local context is an authoritarian state apparatus that has a history of suppressing trade unions and labour protests in combination with an urban regime, where power relations are volatile and violent but function reliably under the subordination of a large industrial labour force.

The chapter demonstrates that in absence of state regulations, transnationally operating retailers like KiKTextilien are attracted to such environments, where so-called "social audits" replace state controls by permitting self-certification. The chapter puts Social Accountability Initiatives (SAIs) at the heart of the problem, rather than them as being mere auditors for the buyers. The effective use of SAIs as part of the buyers' sourcing practices achieves two purposes. First, it helps buyers negate potential lawsuits in case of incidents like the Ali Enterprise Inferno, and secondly, it systematically controls producers to follow the buyer's specifications while being in an arms-length contractual arrangement, through "Coercive Compliance". Finally, the court proceedings following the Ali Enterprise inferno demonstrate this dialectic of mutual reinforcement of authoritarianism on the one hand and hierarchical value chains on the other.

#### **1 Global production chains**

In the year 1911, a devastating factory fire claimed the lives of 146 workers in New York, most of them women and children, in what would be known as the "Triangle Shirtwaist Factory Fire". The fire brought to light almost everything that was wrong with the garment industry. The work conditions in the factory fit perfectly with what we now call a "Sweatshop": there were no fire and safety measures, the doors were locked during the work shifts, over-time and weekend work was mandatory, and if the workers protested, they were told: "If you don't come on Sunday, you need not come Monday". Child workers were used as cleaners and hidden in trash bins during inspection visits from city officials.1

Over a century later, the working conditions remain the same, but what's different now is that the production has been outsourced from the Global North to the Global South. The Global North and Global South are established terms used since the 1960s to distinguish between "rich" and "poor" countries. The Global North is used to describe countries that are industrialised and have high per capita income, the majority of which are present in the western hemisphere, while the Global South is characterised by countries with high poverty, low per capita income and the majority being geographically present in the southern hemisphere.2

The change in the garment production business model is underpinned by reconfiguration of the global economic system and economic crises in the Global North starting in the 1970s.3 Capital's ability to move after neoliberal reforms gave it asymmetrical power over labour – where labour is bound by national borders and global politics, capital has the inherent tendency to search for higher profit achieved by the internationalisation of production. This was a transition that initially started with north–north outsourcing in countries like the USA where production was first moved to underdeveloped regions in the country and then to Latin America. In Eastern European countries, export processing zones developed where production was outsourced to Germany, UK and other developed European economies because of lax labour laws and safety regulations. Starting from the 1970s economic crises and neoliberal reforms, capital's ability to move gained a wider geographical spread that buttressed the business models of TNCs.4

Until the 1970s, TNCs were vertically integrated, and their link with markets of developing countries was based on Import Substitution Industrialisation. The TNCs would serve domestic and international markets but with deregulation and opening up of countries in the Global South to Western capital, Export-Orientated Industrialisation became the development orthodoxy for the Global South and led a transition towards a dispersed production model. This new business model would be conceptualised as "Global Value Chains", where different value functions in the production process are geographically dispersed. This spatial dispersion meant high-value functions such as branding, design and research would be carried out in the financial headquarter of TNCs which historically have been in the Global North, while production considered to be of low value is carried out in the Global South.5 The global value chain production model fails to explore the asymmetric power relations in the production chains and how the surplus is extracted from both ends of the chain: the producers in the Global South and consumers in the Global North.6

Another conceptualisation of the business model "Global Production Networks" explores how TNCs extract maximum surplus and value by engaging in cut-throat sourcing strategies while dealing with producers in the Global South. Competition between different TNCs is based on two aspects. Firstly, price, which is driven downwards and leads to a decrease in the proportional share of wages given to workers. Secondly, control over the market offerings using the "fast fashion" model of production, through which work is intensified, leading workers to produce more under diminishing wages. These two strategies employed by international brands viewed from the perspective of global production networks unveil the constant pressure on labour in the Global South.7 The high-value activities in the financial headquarters of TNCs determine the rents extracted from the producer countries because of their inability to perform such activities due to copyrights and patents erecting barriers to move up the value chains.8 Supporters of the Global Value Chain business model highlight the diminishing importance of nation-states, but upon critical examination, it is revealed that TNCs' financial headquarters rarely shift and TNCs remain embedded in home country rules and regulations rather than adapting to production country laws.9 On the other hand, producer countries that are placed in the Global South suffer from imperialistic relations due to their location in the periphery of the global political economy.10 Countries in the Global North collect more in taxes over the sale and shipment of production orders from the Global South compared to the wages which are given to the workers. Levy argues that global production networks are not just sliced up production chains but also networks that are "integrated economic, political, and discursive systems in which market and political power are intertwined" and are driven by global capital controlled by TNCs.11

Global production networks are seen as drivers of socio-economic development in the Global South as they generate employment. Statistically speaking, employment in the Global South has indeed increased in the last seven decades. In 2010, 79% of the global industrial workforce lived in the Global South compared to 34% in the 1950s. It is not just the percentage that has changed but also the absolute numbers: in 2010, 541 million industrial workers were in the Global South compared to 145 million in the North. What often goes unnoticed is the disparities in working conditions for the same jobs and impact on the environment further intensified by lax safety laws and labour exploitation in the producer countries.12

Production flight to the Global South backed by global capital is not a result of higher productivity or better production facilities, but the wage differential. JannikLindbaek highlighted that the difference between wages in the Global North and the Global South can exceed by a factor of seventy to one in dollar terms and ten to one if adjusted for purchasing power parity.13 This, being the prime motivation for the mobility of capital, has enabled TNCs to extract differential rents. Production contracts in 2010 alone extracted almost \$2 trillion, a lopsided proportion of it from the Global South.14 The outsourcing of production outgrew world GDP growth by 2.2% in 2010 alone. To put these numbers in perspective, a US factory worker who is paid \$21/ hour can be replaced by a Chinese factory worker for a mere 64 cents an hour. The control over the labour market by TNCs is made possible by engaging in the practice of "Global Value Arbitrage", a term coined by Stephen Roach, former chief economist of Morgan Stanley. Arbitrage, a term commonly used in the corporate and financial sector, means taking advantage of different prices for the same productive factor or asset class. The practice of global labour arbitrage viewed through a political economy perspective constitutes unequal exchange between labour and capital, where capital can extract more value for less from the Global South.15

TNCs which now have exclusively reoriented themselves as marketing companies with product research functions like Nike are prime examples of such practices. In 1996, it was revealed that a single Nike shoe is made up of fifty-two components, sourced from five countries with its final production in Vietnam costing \$1.50 per shoe while retailing at \$149.50 in the United States.16 These complex production networks reduce profit margins at each link of the chain until it reaches the assembler, who in turn to be competitive has to reduce the wages and make work precarious by forgoing safety protocols and standards.17 Investigations after the Rana Plaza building collapse in Dhaka, Bangladesh, where over 1,100 workers lost their lives revealed that the price paid to producers by TNC declined 13% between 2013 and 2018 and real wages declined by 6.47%.18

Another aspect of control that is unveiled using the global production networks is the control over the production processes by TNCs driven by competition for the consumer capital in the Global North.19 Under the business model of fast fashion, which impacts producers and workers in producer countries, fashion trends previously dependent on seasons now include various new classifications such as graduation look, wedding season and back-to-school look and are placed strategically with events corresponding to them. Fast-fashion giants like Zara have developed distribution infrastructure to correspond to these new trends which in part retailers like itself were responsible for creating. Zara can design and distribute new design products every two weeks to all of its 2,213 stores globally.20

Referring to Karl Marx's law of value, if the producer cannot increase the work hours beyond a certain extent, they try to fill in every nook and cranny of non-productive time by shortening breaks, literally squeezing workers together to get in more workers to produce.21 Intensification of work and systematic rationalisation trigger producers to engage in precarious work practices, from short-term contracts, delayed payments, unfair production targets, illegal wage reductions, and constraints on freedom of movement and organisation through intimidation, harassment and sexual violence.22

To tie all these different concepts together, the "Labour Value Chain Framework" conceptualised by IntanSuwandi looks at how global capital searches for lower labour costs to extract maximum profit in the consumer markets.23 Empirical data on producers reveal that the countries with the highest participation in value chains, China, India and Indonesia, have comparatively lowest per-unit costs.24 What these three countries mentioned share is their fairly recent integration into the global labour chains, after the fall of the Soviet Union, which opened up China and India's economy to the "free" world. Marx termed this previously untapped global labour market the "industrial reserve army of labour". As the global labour workforce doubled from 1.5 billion to 3.3 billion, coined the "great doubling" by Richard Freeman, it consolidated capital's asymmetrical power, leading the global production wage structure to nosedive and with it working conditions.25 Simultaneously, the "Shock Therapy" prescribed to post-Soviet countries had a detrimental impact on the social institutions, leading to urban migration ripe for exploitation at factories.26 In a prophetic prediction, Stephen Hymer predicted a surplus population of labour or reserve army of labour "could be broken down to form a constantly flowing surplus population to work at the bottom of the ladder".27

This control over the labour market by TNCs is made possible by engaging in the practice of global labour arbitrage, which viewed through a political economy perspective constitutes unequal exchange between labour and capital, where capital can extract more value for less from the Global South.28 The dependency of developing countries on the Global North's capital and their governments' agenda to reduce unemployment further integrates these countries in the global economy. As developing countries are more and more integrated into the global economy, the labour force is faced with increasingly precarious working conditions. A comparison between the growth of the global economy and annual wage growth reveals that the global economy grew at a rate of 3.3% per year between 1995 and 2007 compared to annual wage growth, which was 1.9% for the same period.29

#### **2 Coercive compliance – the issue of social auditing**

Global economic integration of the Global South's labour has led to precarious working conditions, practices of global labour arbitrage and arm's-length contracting, enabling TNCs to escape indirect costs of production, which often dwarf direct costs if the same production was done in the Global North. These indirect costs include healthcare, income and corporate taxes, old-age benefits and other social contributions related to the production economy. TNCs escape these by using social compliance measures as alternatives to labour regulations which were either phased out or weakened by neoliberal deregulation.30

A series of worker abuses revealed in the Global South during the 1990s, where TNCs like Nike and other sports retailers had child labour working in their production lines, led TNCs to develop codes of conduct for producers to salvage their brand images.31 These codes of conduct did not address the primary cause of workplace precariousness, the buying practices of TNCs. The task of monitoring compliance was outsourced to social accountability organisations, which themselves were dependent on TNCs for funding. In effect, social compliance initiatives were used as a smokescreen by TNCs to legitimise cutthroat sourcing practices. Often these TNCs would be on the board of "independent compliance auditors" and as a result, in control over reporting and auditing mechanisms enabling them to avoid transparency regarding buying practices.32

In effect, the presence of these audits intensifies worker precariousness as it has replaced mandatory inspection by the state. According to the American Federation of Labor and the Congress of Industrial Organizations, voluntary social auditing "supplants the role of government inspection and enforcement in ensuring basic standards and rights have been respected by replacing state regulatory action with private corporate initiatives".33 The auditing system is so influenced by the TNCs that former auditors confessed that "we go as far as the brands want us to go". In an interview with The New York Times, a former auditor described the system as having developed "as a dream, then an organization, and it finally ends up as a racket".34

Not only are social audits being structurally biased in the favour of TNCs, they often fall short in identifying even the most blatant human rights violations and are inept at effectively exploring diverse social issues on the work floor.35 As TNCs have been able to outsource their production, they have also replicated this practice with worker rights compliance. According to the Ethical Trading Initiative, companies spend almost 80% of their ethical sourcing budget on auditing alone; the industry itself is worth over \$50 billion. In case incidents like Ali Enterprises and Rana Plaza do happen, they are protected by social audits done by third parties and the responsibility can be pinned on the producers.36

After the Rana Plaza building collapse in Bangladesh, where over 1,100 workers died, two agreements, "Accord" and "Alliance", were signed to "remedy" the causes of such incidents. These two agreements were developed using tripartite consultation between TNCs, the Bangladeshi government and international NGOs. What both of these initiatives shared is systemised control over producers using social audits; both the initiatives, while focusing on the gaps in compliance at the producer end, did not address the fundamental problem causing precarious production, the sourcing practices of TNCs. After the initiation of remedial programmes, producers in Bangladesh felt even more squeezed than before. In an interview, a producer from Dhaka complained that the inspectors from the two programmes prescribed conflicting recommendations to the producers resulting in revenue losses. The Accord and Alliance, while leading to an increase in the minimum wage of workers, added pressure on producers, who to stay afloat increased work hours and demanded higher work targets while downsizing their workforce.37

A transition from voluntary compliance to "coercive" compliance made Bangladeshi producers feel that the agreements had made them even more dependent on international retailers as they had become "too big to fight" with. Previously, TNCs had the power to shift suppliers; now they could shut down the factories if they were not satisfied with the audit reports.38

#### **3 The inferno**

On the eve of 11th September 2012, in Karachi, an industrial fire claimed the lives of 259 people and fatally injured over 100 people.39 At a given time, there were only supposed to be 268 workers inside the factory, but witness testimonies indicate that 885 people were working in the factory on the ill-fated day, 450 on the second floor, 350 on the first, 40 on the mezzanine and 45 in the basement.40 It was payday at Ali Enterprises around 6:30 pm when the fire broke out; the factory being already more crowded than it usually was led to a stampede. This was aggravated by the unsafe planning and construction of the building. There were three exits from the factory, two of which were permanently locked, restricting the workers from leaving the premises. Interviews with survivors revealed that allegedly when the fire broke out, the owners, the Bhailas, forced the workers to salvage the stock before fleeing to safety.41

When investigations started after the inferno, it was revealed that fire breakouts were quite common in the factory.42 The fire started with a short circuit from a poorly maintained electric wiring system and overconsumption of electricity, 318kW, against the 210kW for which it had been given permission. Due to there being no fire exits and safety equipment, the workers in the upper floors were smothered by smoke, and the exploding boiler killed workers in the basement.43 The workers tried to jump from one of the only windows not barred with grilles, but in the process were fatally injured or maimed for life.44

What made matters worse was the structure of the building. The basement, originally a warehouse, was instead used as a work floor, and an additional mezzanine had been constructed completely out of wood which provided fuel to the inferno. The bales of cotton and plasticpacked merchandise placed around the exit of the basement made it impossible for the workers to escape.45 There was only one staircase which connected the building floors from the basement to the second, and the mezzanine; when the fire broke out, the workers were stuck in their workspaces. The cargo lift shaft provided a chimney effect which led to suffocation, and upon post-mortem it was revealed that asphyxia was one of the major causes of death for the workers.46

The investigations revealed that the permission to set up the factory was only for a small industrial unit for 250 workers but the factory owners constructed three additional floors to manufacture additional denim and leather garments. What made this blatant violation possible was that the factory itself was not registered with any provincial department, making it invisible to inspections.47 Further investigations revealed that even the original building plan was not suitable for work and the architect of the building, Qamaruddin, whose name was on the factory blueprint, might not even exist as the licence showed the person registered under the number was born on 1st January 1900.48

The case that would later be known as the "Ali Enterprises" fire, initially considered as a case of negligence and sub-standard safety protocols, was unravelling into a larger story implicating almost all the political parties and stakeholders from the private sector. Even the Pakistani military was showing interest in what happened at Ali Enterprises, but for all of these power players in Pakistan, the interests in the case were different.49

There were two other parties involved: KiKTextilien, the primary buyer from Ali Enterprises, and Social Accountability International (SAI), which issued the safety certification to the factory. SAI delegated the task to RINA international, an Italian certification company. RINA, in turn, outsourced this assignment to its affiliate in Pakistan, Renaissance Inspection and Certification Agency (RI&CA). An SA8000 "Social Accountability" certificate was issued to Ali Enterprises just 22 days before the inferno broke out; the same company has awarded over 100 such certificates to other garment producers in Pakistan over the years.50

It was not only SAI failing to uncover the precarious work conditions at Ali Enterprises; audits conducted by UL Responsible Sourcing hired by KiKTextilien itself failed to reveal the precarious work conditions at the factory. There were two audits conducted by KiK, one in 2007 which revealed that there were unsafe and exposed power circuits in the factory, overtime which was not documented by the factory and blocked factory exits. There was another audit done in 2011, a year before the fire broke out, and according to KiK representative Michael Arretz, all these shortcomings were remedied.51 The audit stated that Ali Enterprise employed 410 workers and all of them were given employment contracts and their work hours were according to the social audit criteria. During the investigations, factory employees revealed that most workers clocked in over 60 hours per week, occasionally even worked 24-hour shifts and were paid on a piece rate basis which ranged from \$1.50 to \$5 per day depending on the order size but hardly anyone ever made over \$70 a month.52 At the time of hiring, workers were informed that the working hours included overtime so they didn't have any choice in the matter. Also, the workers were made to sign blank papers at the time of hiring which remained with the factory meaning the workers have no proof about their association with the factory.53

In addition to the UL, SAAS and RINA certifications, until 2010 Ali Enterprises was WRAP certified as well; the certification was not renewed by the factory management in 2011. The WRAP audit reports claim that no violations of WRAP criteria were found at the factory despite locked doors, illegal construction and overcrowded workspaces. The WRAP chairman, Charles Masten, claimed that they felt comfortable that the audit report was satisfactory for Ali Enterprises when it was last audited by WRAP.54 The inefficiency of these "Social Audits" was discovered by Abdul Rauf Shaikh, an experienced factory inspector, who was scouting for producers in Pakistan on behalf of a European apparel company. During an audit by Rauf Shaikh of Ali Enterprise, it was discovered that two of the three factory exits were permanently locked, including other violations, and when the factory management was confronted, they said: "We are SA8000-certified. Whether you pass us or fail us, that's your issue, we don't care".55 According to Karamat Ali of Pakistan Institute of Labour Education and Research (PILER) "many of the local manufacturers have the SA8000 certification, which according to a source'…is being sold in the city on thela (hawking cart) by accrediting companies for Rs. 200,000 each".56

The role of the other international actor, in this case, SAI, where it outsourced its responsibility to other parties revealed its culpability in the inferno but also revealed systematic issues with Pakistan's labour laws and their implementation.57 The restriction of surprise visits from labour inspectors or any other third-party organisation by law implemented under the influence of industrialists made it easier for the factory management to present a false picture of the safety conditions in the factory. In an interview with the survivors after the inferno, they claimed auditing companies never met them or inquired about the working conditions at the factory.58 The workers also revealed that if there were any visits at the factory, the contractor would provide safety gloves and facemasks to the workers which would be taken back once the visitors left. The same workers also complained about factory management and owners abusing and beating workers.59 In a blatant denial of their responsibility and culpability in the incident, suspended RINA's operations in Pakistan and on a post on their website said: "Social standards, auditing and associated training programs have improved conditions at thousands of workplaces, but they are not a guarantee against poor management, accidents or corruption".60

RINA outsourced the auditing to RI&CA, who according to RINA visited Ali Enterprises between 22nd June and 5th July and spent a total of ten days at the factory. The audit report claimed that there were safety and fire drills carried out at the factory on 2nd April 2012, in which ten workers participated. After the inferno, Clean Clothes Campaign interviewed survivors in 2013; all of the interviewees contradicted these statements in the report quoted by RINA.61 Upon investigation, it was revealed that the fee for "Social Accountability" certification was to be paid by the Trade Development Authority (TDA) which itself runs on the funds given by local producers; this presents a conflict of interest on the part of the TDA. The domestic certification company which was outsourced by RINA, RI&CA, would only be paid if it presented a positive report in favour of the factory.62

What makes these oversights and negligence so perverse is because of the corruption of the labour department and also with the limited capacity of the local administrative bodies, according to an International Labour Organization (ILO) report, there are only 547 labour inspectors for over 350,000 registered factories around the country and only 17 of them are women, while women make up 30% of the total employment in the industry. In another ILO review mission on health and safety in Pakistan, it claimed that if a factory was inspected in 1986, the next time its turn to get inspected will be after 30 years.63

#### **4 Triumph of Karachi's industrial capital**

A day after the inferno broke out, the owners and management staff of Ali Enterprises were charged with murder, and the city administration and local government officials were charged with criminal negligence. An investigation commission was formed to identify the culprits behind the inferno; meanwhile, the police were in search of the factory owners, who fled to a small city, Larkana, near Karachi.64 The initial investigations converged on the result that the most probable cause of the fire was a short circuit because of the overconsumption of electricity, 318kW against 210kW, which allowed ruling out any chance of foul play or deliberate attempt to cause the fire. The investigations revealed the breach of various labour and safety laws by the industrialists, which were made explicit by the investigation commission report.65

The report cited the entire system of Karachi as the culprit for the inferno. It was quoted to say "We would indeed hold that collectively the entire system of Karachi is responsible for the cause of death as at each and every stage; from the setting up of the factory….., to the owners of the factory who try to fit in the maximum number of machinery into the minimum space without bothering about the provisions of law which require at least breathing space….., to the several departments who are existing purely and simply for serving the cause of the factories and the labour who pay lip service to the law on several grounds including non-availability of staff, to the system which does not provide for adequate staff for sustaining and servicing a running industry".66 The commission report, while rightly blaming every link in the chain which caused the disaster, was able to dilute the responsibility of the factory owners and city administration. Fasial Siddiqui, lawyer for the affectees, criticised the commission report findings and said by "dividing the anger all over the place" the report weakened the case against the factory owners.67

Even when the factory owners were in jail, investigators could not convince a single victim's family to file a compensation case. There were even reports of alleged threats to the survivors' families by using twin tactics of providing them with food rations and monetary support while simultaneously threatening them with the help of hired thugs. According to Karamat Ali of PILER, "Even from inside the jail, the Bhaila brothers had been giving directions to their men to threaten the people to move back from the case".68 Even the petitioners' lawyer, Faisal Siddiqui, himself faced death threats in an attempt to make him withdraw from the case.69

The then Prime Minister of Pakistan, Raja Pervez Ashraf, visited Karachi and met with the representatives of Karachi Chamber of Commerce & Industry, who appealed for the withdrawal of the murder charges against the Bhailas.70 Given the support of the industrial lobby and the PM and the reluctance of the survivors to come forward and testify against the factory owners, the Bhalias were granted three months' bail after being arrested. There was a tectonic shift in the case in 2015, three years after the inferno, when a Joint Investigation Report (JIT) surfaced blaming a local political party for being responsible for the inferno. The JIT was headed by paramilitary and intelligence agencies to look at "all possibilities and angles" of the inferno.71 The report itself had no legal bearing because it was based on hearsay but was used to bring down Pakistan's most violent and dangerous political party. Despite no concrete evidence of arson during the initial investigation, the investigation shifted to political games.72 Even the European Center for Constitutional and Human Rights (ECCHR) the strategic litigation firm which took up the case in Germany against KiK, the primary buyer from Ali Enterprises, raised its doubts about the JIT report. The vice-director of ECCHR claimed: "I have read the JIT report. It is based on hearsay. I don't think it can draw some credibility to the new factor as evidence".73

#### 4.1 The case against KiK – compensated at the cost of restitution

The case against KiKTextilien set a precedent for the global garment industry, especially for retailers relying on producers in the Global South. The case was groundbreaking in several regards. Firstly, the claimants would receive lifelong pensions from KiK matching ILO international standards. A financial contribution of this magnitude was only made possible because the case was pursued in the home country of the buyer. Secondly, Germany and Pakistan follow different legal systems; the case was judged in Germany according to Pakistani law based on English common law. This was made possible under the Rome II regulation, which allowed compensation claims to be judged according to the law of the country where the damage occurred.74 It is worth adding that in addition to the German court taking up a case based on English common law of negligence, English courts themselves have never attributed liability to a sourcing company for human rights violation in its supply chain. Additionally, the case took into account the imperialistic economic structures and asymmetry of power between the buyer and producer because of developments in lawsuits against TNCs from different sectors.75

Immediately after the inferno, KiK paid \$1 million to the affected families under the Memorandum of Understanding (MOU) signed with PILER and CCC; the MoU included longterm compensation and a contribution to improve the working conditions in garment factories in Pakistan. After giving out the initial \$1 million, KiK stalled the negotiations and rejected the claim that it was responsible in any way for the inferno.76 After stalling negotiations for over a year, in December 2014, KiK made an inadequate offer of \$1,000 per affected victim and refused the compensation plan according to the principles of ILO Convention No. 121 concerning the benefits to the affected in case of injury related to employment.77

In response to the inadequate offer, the family of victims Muhammad Hanif, Muhammad Jabbir, Abdul Aziz Khan and Saeeda Khatoon formed the Ali Enterprises Affectees association and with the help of ECCHR filed a case against KiK in Dortmund, Germany.78 The four claimants, one survivor of the factory fire and three bereaved sought €30,000 each in compensation from KiK and acceptance of liability in failing to protect the workers and maintaining adequate working conditions at Ali Enterprises. The reason for forming the association was that German law does not recognise class-action lawsuits, so upon consultations with ECCHR, it pursued the case as an association.79

ECCHR offered its services of legal experts in Germany, and in August 2016, the Dortmund court issued the initial decision, granting legal aid to the claimants and accepting jurisdiction over the case. This was unprecedented in the German legal system, where a German company involved in human right violations abroad was to be tried in Germany.80 However, the initial court hearing in 2018 did not address KiK's responsibility in the inferno but the question of statutory limitation; initially, KiK agreed to waive the statutory limitation requirement but later rescinded this offer.81

The local and global campaigns against KiK were able to gather public and institutional interest in the case, and organisations like CCC and PILER focused on negotiation and fulfilment of the MoU while ECCHR believed it to be an opportunity to implement lasting institutional changes and set precedents for future litigation involving TNCs. The success of the dual campaign targeting the state, Germany, as a regulator and second, corporations, KiK, in this case, led to a groundbreaking development in 2016. The pressure from campaigning for four years and the civil suit led to the MoU resulted in \$5.5 million long-term compensation.82

How the compensation was calculated is another success as affectees were paid in line with the ILO Convention No. 121. A proxy wage of PKR 25,525 (\$242) was used, three times that of what the Ali Enterprises workers were receiving. In a first, the ILO served as a facilitator for the calculation of the payments where CCC**,** KiK and the German Government (as an observer) took part in the negotiations.83 However, the compensation from KiK was voluntary as it does not consider itself to be liable for the pain and suffering caused by the fire. In 2019, the regional court of Dortmund rejected the claim by the affectees association on the ruling that the claims were statute-barred. In December 2019, the claimants again filed for legal aid at the Oberlandesgericht Hamm, but the court again rejected the case on the same statutory limitation grounds.84 The ruling proved that local and international law is still shackled in domestic laws. Miriam Saage-Maaß from ECCHR on the ruling said: "The law urgently needs to be updated to reflect how globalized business operates. This is the only way to ensure that people affected by corporate rights violations get access to justice they deserve".85

Saeeda Khatoon, who lost her son in the inferno, exclaimed that "I will not give up this struggle till my last breath".86

#### **Conclusion – the architecture of impunity**

The events that led to the Ali Enterprise inferno and the ones that followed coupled with the court cases taken up against the factory owners in Pakistan and KiKTextilien in Germany unveil three barriers that manifest themselves not only locally and among producer countries but also globally. These three barriers – structural, economic and legal – resulted in the inferno and influenced the responses to the inferno both locally and globally.

Starting with the structural barrier, in Pakistan, right after independence, an asymmetrical relationship between labour and capital formed that can be traced back to how the country set its course towards development. This asymmetric power relationship can be put into perspective by the statement of Pakistan's prime minister in 1949 just two years after the country's independence, where he said: "We must create conditions which are favourable to the labour. My government will take all necessary steps to see that labour gets its due share in all the enterprises…. Labour must remember that the interests and the welfare of Pakistan come before the interest of any individual or class of individuals and must not do anything which in any way weakens Pakistan. If Pakistan endures and prospers, the problem that Pakistani labour has can be solved".87 This asymmetrical power relation replicated itself not only in the industrial relations but also between other state and non-state actors. According to Hamza Alavi, Pakistan after independence inherited an "over-developed" state where state apparatus overpowered social and non-state actors.88 This "overdevelopment" was unveiled in the case of the Ali Enterprise inferno and how historically the state undermined the labour movements for political gain and in connivance with the industrial elite.

This structural barrier replicates itself globally as well. Pakistan being geographically placed in the Global South faces the same working conditions as other developing countries dependent on foreign capital for economic growth. Pakistan's presence in the Global South places it on the periphery of the global capitalist economy. The concept theorised by Wallerstein in "World Systems" approach coupled with global production chains unveils the asymmetric power relationship between the countries in the Global North and the Global South.89 As discussed, global capital and labour relationships are imperialistic. Lenin's conceptualisation of imperialism constituted "complex intermingling of economic and political interests, related to the efforts of large capital to control economic territory".90 In the context of global production networks, northern capital controls "economic territory" using different management techniques which are supported by neoliberal reforms. These global and local structural changes in the economic and power structures have led to a development trajectory where exploitation of the workforce is paramount for the global capital to sustain itself. Another structural barrier by which globally dispersed production is supported is social auditing systems; in a way these TNCs provide both the "bullet and the bandage" to the workers. TNCs' sourcing practices undermine basic human rights on the work floor; then TNCs try to distance themselves from the entire production function by employing third-party social audits. In effect, these auditing companies help TNCs escape responsibilities despite their involvement in the development of audit criteria and methodology.

The second barrier, economic, is closely linked with the structural barrier. Locally, an asymmetrical relationship formed in Pakistan was further intensified by mass migrations into the country. These migrants turned to cities for economic opportunities, giving industrial capital a surplus supply of labour to choose from and squeeze their rights and make working conditions more precarious. Additionally, the adaptation of neoliberal reforms led to the deregulation of the entire economy; new economic orthodoxy meant privatisation and the minimum role of the state.

This economic barrier replicated itself globally. After the fall of the Soviet Union, economic liberalisation of India and China, the "great doubling" of labour available for capital to extract surplus, drove wage structures down globally. In addition to the "great doubling", neoliberal reforms were detrimental for labour in the Global North as industrial jobs were outsourced to developing countries, which contributed to 'anti-globalisation' protests like the Seattle riots.91 In the Global South, the jobs brought with them sweatshop-like conditions, poverty wages, coercion to control labour, use of child labour and abandonment of factory audits. These precarious practices are underpinned by countries in the Global South's "dependent development" on Western capital. Examples of such practices are not limited to the traditional garment and textile industries; Apple's products being produced under prison-like conditions unveil the omnipresence of these practices whenever an international buyer is involved.92 These harrowing industrial incidents were the result of cutthroat economic competition which takes place on three spatially different levels: first, among the TNCs in the Global North for consumer capital; second, between suppliers in the Global South, for sourcing contracts; and third, among countries who are part of the global production economy, who compete with each other by relaxing laws protecting workers even more and promoting a "business-friendly" work environment.93

The use of a weak JIT report prepared by security agencies, support from the then prime minister and lobbying from the entire industrial establishment exonerated the Bhailas and in effect the entire industrial class at large. The glaring gaps in worker safety, hiring practices and all other illegalities which keep the industrial capital competitive were overshadowed by the "extortion mafia", which historically has been used by the same industrialist to do its dirty work. The new legal opinion of the courts, investigating agencies, Karachi's business community and the political parties converged, and the law was used as a tool of the political powerplay.94

The legal barrier replicated itself globally. When the case was taken up against KiK, it denied its responsibility for what happened at the factory due to its arm's-length relationship with the producer. This commercial relationship is manifested due to the presence of the first two barriers. Given the different legal systems in the producer's and retailer's countries, the case stalled for eight years and was finally thrown out because of procedural modalities while at least due to the international coverage, campaigning and interest of different organisations, the affectees were able to get compensated for their losses. This compensation did not include the liability of pain and suffering caused to the claimants and their families, but due to the commercial relationship without any strings attached and the cover of third-party audits, KiK was able to stall the negotiations until the case was dismissed on statutory grounds.95

#### **Notes**

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