The Corporate Social Responsibility of Pure-Play Sites versus Brick-and-Mortar Corporations
Juliana Muñoz
Recent Graduate of the CIS Program
jmunoz@mesastate.edu
1102 Belford Ave. Apt. D
Grand Junction, CO 81501
Johnny Snyder
Associate Professor of Computer Information Systems
Mesa State College
josnyder@mesastate.edu
1307 Colorado Ave.
Grand Junction, CO 81501
(970) 248 - 1722
Communication to: Johnny Snyder josnyder@mesastate.edu
The Corporate Social Responsibility of Pure-Play Sites verses Brick-and-Mortar Corporations
Key Terms:
Brick and Mortar, Carroll’s Pyramid, Pure-Play, Corporate Social
Responsibility, Disaster Fundraising
Abstract
The study on the corporate social responsibility (CSR) of pure-play e-commerce businesses
versus brick-and-mortar companies is a relatively new one. There is very little, if any information that
can be found on this subject. A comparison of CSR between the two types of businesses, online and
brick and mortar will be presented and explored in this paper.
The goal of this paper is to begin to formulate the relationships between brick-and-mortar
companies and pure-play companies in a socially conscious setting. Many brick-and-mortar companies
directly affect the communities in which they reside, but a pure-play company that has no major physical
presence in any given community cannot affect said community in the same manner, and therefore has a
different social responsibility to the community if it has one at all. This comparison will be made
utilizing a model known as Carroll’s Pyramid and the business standards that have been set out for brickand-mortar companies. This will help to show the fundamental levels that any brick-and-mortar company
might try to place themselves on and to determine the possible placement and motivations of a pure-play
site’s involvement in CSR in times of crisis.
Currently, there is limited information on whether pure-play sites have social responsibility or
not. This paper aims to begin to pose and answer questions as to why pure-play sites might get involved
in crisis such as Hurricane Katrina; something that brick-and-mortar companies are more or less expected
to do based on the direct impact they have on society and on the economy as a whole, a factor that does
not hold true for pure-play sites.
1
Introduction
America and the rest of the world have seen disasters both natural and man-made rising at an
ever-increasing pace over the past few years. This is evidenced in the figure due to the EM-DAT (2006)
international disaster database below.
Figure 1
The increase in natural and man-made disasters reported
The four events that come to mind immediately are the terrorist attacks of September 2001, the Asian
Tsunami that hit in December 2004, and most recently, Hurricane Katrina in August 2005 and the South
Asia Earthquake in October 2005. Citizens and corporations came together to donate money, time, and
other resources that they were willing or expected to give. This held true for all four events.
Behind the visible aid being given, was a resource that few people even noticed. Pure-play sites
such as Amazon.com and other Internet corporations like Ebay, Yahoo, and many others in the long list of
behind-the-scenes helpers came forward and used their Internet sites (a very valuable piece of Internet
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real estate) as a base for people who wished to contribute to those in need. Beyond the use of their sites,
these pure-play companies also gave their own earnings to relief efforts (Stiner, 2005).
In the case of brick-and-mortar companies, there are certain social responsibilities that
communities surrounding said companies expect them to fulfill. In the case of sites like Amazon.com and
other Internet sites, there are no such expectations due to the lack of a surrounding physical community.
Still, one can find Internet based companies putting forth time and effort during these times of crisis. The
questions that are posed by such actions are: Why? Do they really fit into a place where social
responsibility applies in the same manner as brick-and-mortar companies?
Differentiating Brick-and-Mortar and Pure-Play
A good place to begin to answer these questions is by laying out the requirements that make up a
brick-and-mortar company and a pure-play company. For the purposes of this analysis, brick-and-mortar
companies, also known as old-economy organizations (Turban et al., 2006) are businesses that have all of
their resources put into a physical location. All buying, selling, shipping, services, and all other functions
that are necessary to keep the business running are done in either one or several physical locations. Given
the nature of the brick-and-mortar company, the business is most likely surrounded by a community of
some kind. It hires those who live in that community, is a main source of selling and buying in that
community, or provides some service to that community. A prime example of a brick-and-mortar
company would be Wal-Mart where a physical presence in a community has a direct effect on said
community’s economy. In the 21st century business organization, brick-and-mortar companies also have
a Web presence which can include an informational web site and/or an e-commerce site. All in all, brickand-mortar corporations affect their community more directly than a pure-play corporation.
A pure-play organization may have a physical building, but it exists solely to house either
products for shipping or employees. All day-to-day business transactions and activities are done via the
Internet. Given the market they can reach, they sell and buy from people all over the world, while
contributing, perhaps, jobs for people in the community housing the physical building. A pure-play
company has far less impact on the local communities that it serves.
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If this difference between brick-and-mortar and pure-play were the factor that dictates social
responsibility, then why would pure-play corporations need to make an effort to cater to the community at
large? Can they be expected to care for communities that they serve all over the world? If brick-andmortar companies already do, then why should a pure-play like Amazon.com even be concerned? The
answers to these questions can begin to be formulated within the definition of social responsibility.
Defining Corporate Social Responsibility
Corporate social responsibility can be defined as “the concept that business should be actively
concerned with the welfare of society at large” (Brigham, 2004, p.16). The aforementioned is the most
rudimentary of definitions. This definition puts a certain amount of stress on companies to give back to
the community in any way that they can. This can include reducing pollution caused by operations,
offering benefits to employees, donating money to charities, or participating in volunteer events. Deeper
still, lies another more detailed definition due to Wood (1991) which states that the
basic idea of corporate social responsibility is that business and society are interwoven rather than
distinct entities and that expectations are placed on business due to its three roles: as an institution
in society, as a particular corporation, or organization in society, and as individual managers who
are moral actors within the corporation (p. 695).
Close attention should be paid to the fact that each of above definitions include “in society.” This
is due to the fact that brick-and-mortar corporations have a noticeable presence in any society and on the
economy which puts them in a position to fulfill certain expectations from the society or community that
they directly affect. For example, after Hurricane Katrina hit one hundred and twenty three Wal-Mart
stores were closed in the gulf coast region (Bhatnagar, 2005). One can deduce that the number of jobs
lost was enormous. Despite the corporation’s massive monetary losses, Wal-Mart still offered jobs to
their employees that resided in the areas that were devastated by Katrina. Relocated victims were able to
resume work at a Wal-Mart nearest their new homes. While it was a very good deed done by Wal-Mart,
or so it seems, one might have speculations as to why it is that they did this. A humanist might say it was
to help those in need. A skeptic would say that it was a public relations ploy. A businessperson,
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however, might turn to a model that could help better explain the possible logic behind such a move for
both brick-and-mortar and pure-play sites.
An Explanation of Carroll’s Pyramid
In 1991, Archie Carroll developed a model for social responsibility. Sexty (2004) states that the
model: “presents the concept such that social responsibility will be accepted by a conscientious business
person,” (p.7). There are four levels to the pyramid, which represent economic, legal, ethical, and
philanthropic responsibilities of a business. These levels and the responsibilities for each level are
illustrated in the following figure.
Figure 2
Carroll’s pyramid
(Carroll, 1991)
The lowest level of Carroll’s pyramid is economic. All corporations must fulfill one common
goal to survive: make money. This is the most vital level to all companies for if they are not turning a
profit then they will not survive in the market at all. The second level of the pyramid is that of a legal
nature. When a company does not obey the law, they can lose their customers, their reputation, and in
5
many cases their entire business. The level dealing with ethics is often stated in a company’s code of
ethics and can vary from company to company. The first three levels of the pyramid fall under a
company’s code of ethics or somewhere in their mission statement. The highest level, philanthropy, is,
as Carroll (1991) states “not expected in an ethical or moral sense” (p. 43). Carroll goes on to assert that
philanthropy is desirable as viewed from a community standpoint, but is totally voluntary on the part of
the corporation. It is the level of philanthropy this work must continually question for it may be viewed
as the more unlikely of motivations, especially in the case of pure-play sites.
The level of social responsibility expected of any corporation, can be based off the physical
presence and direct impact of that corporation on the local economy. One might ask then, based on
Carroll’s pyramid, where do pure-play sites such as Amazon.com fall and why? What is it that pushes or
pulls them to cater to society in this hypothetical tug-o-war?
To Give or Not To Give (Brick-and-Mortar vs. Pure-Play)
It has been established that the communities that support brick-and-mortar corporations expect
some amount of retribution in its time of need, but there has been some debate over whether or not
companies should be giving back to the community at all. According to Sexty (2004), there are several
cases for and against the involvement of brick-and-mortar corporations when it comes to social
responsibility, but despite the arguments set forth for those companies, how do they relate to pure-play
being that pure-plays do not yet have the solid ground to stand on as brick-and-mortar companies do. By
paralleling the below motivations, one may be able to see the differences and/or similarities between the
two types of entities and why pure-plays may or may not choose to get involved.
Pure-play, and other Internet companies, like any brick-and-mortar company have a fundamental
need that they must fulfill first and foremost: make their business survive. One reason that pure-play sites
may not get involved in being socially responsible is that,
Profit maximization is the primary purpose of business and to have any other purpose is
not socially responsible. To have other than a profit-maximizing goal is to sabotage the
market mechanism and distort the allocation of resources. Generally then, it is contrary
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to the basic function of business to become involved in social matters. It should not be
forgotten that business is an economic institution, not a social one, and its only
responsibility is to manage efficiently within the law. The company would be
irresponsible if it did not pursue profits and operate in the efficient market (Sexty, 2004,
p. 4).
If an Internet company were to follow the advice of the above quote then they would only be
climbing up to the third level of Carroll’s pyramid, but it that necessarily a bad thing? First and foremost,
a business must be just that. While brick-and-mortars seem to continually fill their social responsibility,
an Internet company, that has no physical presence in most communities, may choose to cater only to the
lower levels of the pyramid, something that they can do unnoticed.
The next case for not being socially involved brings up something not yet touched upon, the idea
that there are other entities that dictate whether or not social involvement should be served.
Business corporations are responsible to the shareholders and, in effect, have no authority
to operate in the social area. When a corporation becomes involved in social matters,
there is a question of legitimacy. Even if corporations are sufficiently competent and
powerful to bring about social changes in matters considered beyond the range of their
immediate involvement, there is a real question as to whether such endeavors are
appropriate (Sexty, 2004, p. 4).
Again, we see the idea of fulfilling basic business necessities, more specifically, to the
shareholders of a company. In many cases, Internet sites also have this to fulfill. Since they are in the
virtual world, they can even better serve their shareholders and may even find that their shareholders are
less willing to give up their earnings to aid society.
The third point states that, “social policy is the jurisdiction of governments, not business” (Sexty,
2004, p. 4). This is a simple concept to understand. Government has been set in place to handle social
issues and disasters. While brick-and-mortar companies seem to intervene anyway, pure-plays and other
7
Internet sites are farther removed from physical society and can effectively leave solutions to social
problems in the hands of the government.
Lastly in the cases against why companies should be involved, “social responsibility is viewed by
some as another excuse to let big business increase its power. The increase in power comes as a result of
business becoming involved in social as well as economic matters” (Sexty, 2004, p. 4). This is probably
the most difficult obstacle to overcome for any business. How society views a company determines their
customer base and their success. Companies are left to the task of gauging how much to give, how little
to give, and when. If generosity is not planned out just right then a corporation may get coverage as just
trying to prey upon disaster for their own benefit. This rings even more true for Internet sites because
they are making their way out of their niche to perform public services.
Skeptics will target them and
paint these sites in a bad light if they do not operate in an appropriate manner. Despite all of the reasons
for brick-and-mortars, pure-plays, and other Internet companies to not operate at a philanthropic level, all
of them are stepping forward to lend a hand. There are several reasons as to why they might do this.
Some of these reasons contradict the ideas above, but the debate uncovers the possible mind set of
corporate America and illustrates their priority scheme that directs their corporate actions.
First, Sexty (2004) asserts that a corporation must aim to fulfill the needs or expectations of a
community, the reason for this being that: “[A] business functions by the consent of society and therefore
must be sure to satisfy the needs of society. In other words, the existence of the business enterprise
system depends on its acceptance by society” (p. 3).
While this pertains to brick-and-mortar it also applies to a pure-play corporation. Without the
support of customers from both the Internet and those who may have never recognized the Internet as a
source for supply and demand, they will not function: they will not survive. Making themselves known
through public services can only help to show the non-virtual communities that they are reaching out to
be a part of the physical society and close the gap that may be caused by their lack of physical presence.
8
Secondly, “social responsibility is in the stockholder's interest, that is, being socially responsible
will simply be profitable especially in the long term. Corporate virtue is good for profits,” (Sexty, 2004,
p. 3).
Again, we must go back to the economic level of Carroll’s Pyramid.
Making profits and
maximizing stockholder wealth is the foundation on which every other level rests upon. Catering to
stockholders and long-term profits are not something that a pure-play corporation would be immune to.
Stockholders and profits are the driving force behind any successful corporation.
However, does
philanthropy add to the bottom line?
Thirdly, a “business must realize that social problems can become opportunities, or can lead to
profits,” (Sexty, 2004, p. 3). As non-philanthropic as this sounds, we come back to the idea that profits
are necessary. In the case of Amazon.com, donation links were added to their web site, which one may
speculate, increased the amount of hits their site took per day. It is very probable that those hitting the
site to make donations to Hurricane Katrina victims may have taken a detour to buy the latest DVD or
CD. Inevitably, they may have seen an increase in profits whether planned or unplanned.
Fourth, “business enterprises must be concerned with the public image and the good will
generated by responsible social actions,” (Sexty, 2004, p. 3). As mentioned earlier in this paper, image
and reputation can be the main source of a pure-play site’s success. It is important for them to keep up
good public relations.
Lastly,
Business should be given an opportunity to solve some social problems. The logic
behind this argument is that business can solve problems as well as government can and
that it certainly cannot do any worse than government has in the past: business possesses
the expertise, in its managers and executives, to develop plans to overcome social
problems. As government is reducing its efforts to address some social problems,
business needs to fill the gap (Sexty, 2004, p. 4).
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This last motivation is one that clearly falls under the third level of Carroll’s pyramid, ethical.
Corporations, both brick-and-mortar and pure play, while making money and fulfilling the first two levels
can also use their positions in society, both physical and virtual, to try and improve the quality of life
wherever they can. If they have the means to help, then it may just be the right thing to do.
Pure-play sites have been addressing all of the above business necessities and it can be seen
clearly during the most recent of disasters. E-commerce sites have come to the aid of not only disaster
victims, but also put the spot light on e-commerce and managed to skillfully multi-task in both acting in a
philanthropic manner and catering to their own company goals.
Contributions of Pure-Play Sites in Times of Crisis
Aside from all of the whys, pure-play sites have accomplished much in the areas of social
responsibility not only for victims of catastrophes, but also for the attention brought to the Internet.
How Much Charities Raised Online
3500
3000
Millions of US$
3000
2500
1900
2000
1435
1500
1025
1000
525
500
192
0
1999
2000
2001
2002
2003
2004
Year
Figure 3
Charitable contributions collected online
(Pearlstein, 2006)
Referring to Figure 3, one can see how quickly online donations have risen over the past few
years. The jump from 2003 to 2004 was enormous, an increase of 1.1 billion dollars towards relief efforts
10
for the numerous disasters in 2004. Based on those figures, it can be projected that there will be an
increase in online fundraising and that pure-play sites, no matter the motivation, have become a place
where citizens who wish to help can. These sites have opened a doorway that until recently had been
closed.
American Red Cross Disaster Fundraising
1800
60%
1670
1600
Millions of US$
1200
40%
1078
1000
30%
800
568
600
20%
400
Percent Raised Online
50%
1400
10%
200
8.3
0
0%
2001 - 9/11
2004 - Asian 2005 - Hurricane 2005 - South
Terrorist Attacks
Tsunami
Katrina
Asian
Earthquake
Year - Disaster
Figure 4
Online Disaster Fundraising
(Pearlstein, 2006)
Figure 4 shows an intriguing piece of information. It would seem that the terrorist attacks of 9/11
began the intervention from e-commerce sites in times of crisis. Many web sites (Google, Yahoo!, e-Bay)
listed links to help the victims of 9/11 (Internet Archive, 2006). Further, it can be seen that on-line sites
have allowed citizens to reach out to other parts of the world. This was done first by Google, who used
its web site to notify the Internet community of the attacks and ways to help (Vise & Malseed, 2005) The
most recent of events, the South Asian Earthquake, while binging in less by way of donation than the
other events, shows that fifty one percent of all donations received were collected online. It appears that
this trend of online donating will continue.
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A Nielsen//NetRatings report (2005) cites a staggering 402% growth in Web traffic to the
National Oceanic and Atmospheric Association’s web site and 184% increase in Web traffic to the
American Red Cross web site during the days following Hurricane Katrina. Table 1 summarizes the
Internet public’s thirst for information following the disaster.
Site
8/22 Unique
8/29 Unique
Growth
Audience (000) Audience (000)
Advance Internet
516
1395
170%
ABCNews Digital
486
1102
127%
MSNBC
3181
6532
105%
WorldNow
558
1086
95%
Fox News
1106
2037
84%
Weather Channel
4482
7736
73%
AOL News
1833
3126
71%
AccuWeather
622
961
55%
Internet Broadcasting
1474
2140
45%
CNN
4817
6917
44%
Table 1
Nielsen//NetRatings growth in traffic following Hurricane Katrina
Sites like Amazon.com had links to aid those in need, as well as links to find information on the
Katrina events. Some of these Internet corporations even went so far as to donate money of their own,
even though they had no physical presence in the affected communities. For example, eBay donated 1.4
million dollars to eBay business owners to distribute to their community so that victims or those
organizations such as American Red Cross who were aiding victims, could utilize it most effectively.
According to the North American President of eBay, Bill Cobb, “They know best what their community
needs, so we'll rely on them to make these dollars work as hard as possible,” (Stiner, 2005, p. 1). While
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the money was distributed to eBay business owners, it was not for them. eBay higher-ups gave the
money to other companies to facilitate the relief efforts of Hurricane Katrina victims.
Results of Philanthropic Activities
Being a philanthropic corporation has many dimensions. Carroll (2000) believes that “strategic
philanthropy” (p. 36) will be the trend in the 21st century, where corporations align their philanthropic
activities alongside their corporate (economic) mandates. In support of this idea, Porter and Kramer
(2002) make the argument that a mix between philanthropy and economic success (pure business) is an
optimizing endeavor to be undertaken as situations arise and warrant attention. Porter and Kramer go on
to claim, “in the long run, then, social and economic goals are not inherently conflicting but integrally
connected” (p. 59). This belief is re-enforced Carroll (2000) who asserts that corporate philanthropy is, in
effect, being a “good corporate citizen” (p. 36). This is put into practice at the Googleplex (the Google
corporate headquarters compound) via their corporate motto “do no evil” (Vice & Malseed, 2005).
The question continues to arise: Does being a good corporate citizen add to the bottom line? If
so, how? In the e-commerce world, the number of “hits” taken by a web site per day is an indicator of the
site’s popularity or success. These hit metrics are used by e-commerce vendors to sell advertising space
on their pages, due to the exposure for the advertisers. By using the web site Alexa.com, site rankings (a
function of number of people visiting and page views) can be calculated and viewed on a time-line.
These graphs illustrate how the Internet public visits and views web sites and can be used to correlate
online behavior to events of interest.
Figure 5, produced by Alexa (2006) illustrates how Hurricane Katrina initiated a spike in the
news sites rankings. The news spike began within hours of Hurricane Katrina as the world gained
information on the latest disaster.
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Rank spikes due to Hurricane Katrina
Figure 5
Increased interest implies increased hits to news sites
The next figure, again due to Alexa (2006) illustrates a corresponding spike in e-commerce sites rankings
who had “donate here” buttons on their home pages for the victims of Hurricane Katrina. Here, the spike
occurs as a delayed effect indicating the time needed to decide and implement corporate philanthropy
(donating web site space) and the public’s reaction to the human suffering after the disaster. A number of
other items are highlighted on the graph as well, indicating events that can be identified on the timeline.
As these spikes indicate increased web traffic, other pure-play sites will likely follow suit and implement
philanthropic uses of their home page. As Michael Porter states in his paper on strategy and the Internet
(2001) “Once a company establishes a new best practice, its rivals tend to copy it quickly” (p. 71). One
can be assured that if adding buttons to a web site to help a social cause increases web traffic, many more
buttons will be seen after the next disaster.
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Hurricane Katrina
Post-holiday slow down
South Asia Earthquake
Figure 6
Philanthropic effect on web site rankings
The next figure (Alexa, 2006) shows the traffic rankings for three of the larger retail (brick and mortar)
establishments with web sites in the US economy. The holiday spike is very evident, while spikes due to
disasters are absent. This indicates that while the Internet public supports the stores and their web
enabled shopping, they have a tendency, post disaster, to visit sites exhibiting compassion and corporate
philanthropy to those in need.
Figure 7
The effect on brick and mortar web sites
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Finally, a traffic ranking graph (Alexa,2006) of the three largest contributors to the Hurricane Katrina
relief efforts (Money, 2006), Wal Mart, General Electric and Office Depot’s web sites. Again, there is a
noticeable absence of a spike of activity for the Hurricane Katrina event. We do note that the holiday
spike is evident on the Wal Mart time series, while Office Depot remains steady and General Electric
moves slowly up then back down. Again, it is observed that the Internet public is attracted to sites whose
philanthropic behavior is evident.
Figure 8
The largest corporate contributors to the Hurricane Katrina relief efforts
The traffic details provided in Figures 5 – 9 are revealing. There is a noticeable difference in
traffic patterns for pure-play and traditional commerce sites. While traditional commerce sites continue
in a pattern of “business as usual,” pure-play sites move with current events by updating their web pages
and implementing new ideas, illustrating the concept of “short-lived” on the Web.
Conclusion
In the end, it would seem that the level of social responsibility rests on pre-established
expectations and the level on which companies directly affect their surrounding communities. The
speculations as to why companies fulfill their philanthropic responsibility can be argued over, refuted and
debated. Brick-and-mortar sites have their expectations laid out for them, very clearly, but it is not so
simple in the case of pure-play corporations. However, there does seem to be a level of philanthropy and
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CSR embedded in the pure-play psyche. Further, this paper has illustrated that as the pure-play sites
become involved, there is a direct effect on their rankings and number of page views – the merge of both
social and economic interests.
Figures 5-8 illustrate that philanthropic activities on the Web can benefit the pure-play company’s
bottom line. This pure-play CSR had an effect on the Web traffic to their sites - a closely monitored
metric in the world of e-commerce. The shareholders of a pure-play company should have no objection
to the addition of a “donate here” button to the site seeing as this causes no direct revenue loss to the
company. However, the addition of this type of link can yield intangible benefits, resulting in rewards for
all shareholders.
As to the issues raised in a previous section as to whether pure-play companies should climb
Carroll’s pyramid to the top, a number of points can be made:

philanthropic behavior can benefit a pure-play company’s bottom line, if only in the arena of Web
metrics.

pure-play company’s have a global reach and are not constrained by geo-political boundaries as
are governments and can reach citizens of the world and not just of a single country.

pure-play company’s can move faster with donations and money transfer over the Web to the
targeted relief area.

pure-play company’s addition of buttons to its web site moves the concerns of how much to
donate and when to donate to the consumer – the Internet public.

pure-play company’s assisting the Internet public to “do good” can yield intangible benefits such
as return visits.
These authors anticipate that the questions presented throughout this paper will be answered as
the number of online corporations continues to grow and as more disasters occur. It may very well be,
that as Internet companies begin to become the majority of those contributing to our economy they may
have the same expectations to donate their money to aid those in need. Now that they have made
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themselves so abundantly visible, it may be that customers, victims, and those in society will begin to
look to them as another much-needed resource during times of crisis. They may also serve to take some
of the weight off the shoulders of brick-and-mortar corporations, but will these Internet sites continue
diligently at what they have started? Will they continue to cater to more than the virtual society?
Unfortunately, these questions will only be answered with time, more disasters and observation.
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