How much of Etsy’s revenue comes from haram?
Etsy provides an online marketplace that connects buyers and sellers.
Etsy earns its revenue from the following revenue sources:
- Marketplace Revenue:
Includes charging sellers using Etsy’s marketplace a listing fee of ($0.20 per listing), transaction fees (5%), and payment processing fees.
- Services Revenue:
Includes advertising services for prominent listing placement in search results.
In addition, Etsy offers its sellers discounted shipping labels for their products.
The contributions from each of Etsy’s revenue segments in their 2020 annual report were as follows:
Of concern for Practical Islamic Finance is revenue generated from selling and advertising products that may be haram.
The chart below provides a breakdown of gross revenue earned by Etsy sellers as per Etsy’s 2020 Annual Report:
From the category breakdown, most items sold on Etsy seem rather innocuous and not inherently haram.
As per company policy, alcohol and drugs are prohibited on Etsy.
However, Etsy does advertise and profit from impermissible items such as pork products, alcohol paraphernalia, and items with unislamic imagery or messaging.
So it is undeniable that some of Etsy’s profits come from items that are haram.
Given Etsy does not provide a detailed breakdown of everything it sells, determining exactly what percentage of items relate to things that are impermissible is extremely difficult.
Practical Islamic Finance concludes:
Since Practical Islamic Finance cannot verify how much revenue Etsy generates from selling and advertising products we think are haram, we find it questionable whether a material part of Etsy’s revenue comes from haram.
Does Etsy rely on interest to operate?
| Year-to-Date for period ended 3/31/2021 | Fiscal year ended 12/31/2020 | Fiscal year ended 12/31/2019 | |
|---|---|---|---|
| Interest Income | $73 | $7,102 | $13,199 |
| Total Revenue | $301,754 | $1,725,625 | $818,379 |
| Interest Expense | $7,329 | $42,025 | $24,320 |
| Total Expenses | $240,368 | $1,301,616 | $729,618 |
| Interest Income / Revenue | 0.02% | 0.41% | 1.61% |
| Interest Expense / Total Expense | 3.05% | 3.23% | 3.33% |
Practical Islamic Finance concludes:
Riba is used but not relied upon in Etsy’s operations.
What is Etsy’s Environmental, Social, and Governance (ESG) impact?
Environment
According to Chelsea Mozen, Etsy’s Director of Impact and Sustainability, Etsy operates a carbon-neutral business.
In addition, Etsy sources 100% of its electricity from renewable sources.
Social
Etsy has an impressively high Glassdoor rating of 4.5 out of 5.0 from over 200 current and previous employees compared to a 3.3 average for all other Glassdoor rated companies.
Governance
No notable governance highlights.
Practical Islamic Finance concludes:
Etsy has a net positive ESG impact.
Comfort Rating
From Etsy’s business, financial, and ESG reviews, Practical Islamic Finance rates Etsy stock as:
Questionable to invest in from a Halal perspective.
Justification
Etsy is another hard call to make. While there is nothing inherently haram with Etsy’s business model, there are some products sold on Etsy’s marketplace that we wouldn’t feel comfortable profiting from. Since Etsy doesn’t report to the level of detail required how much it makes from which products we cannot be certain that only a non-material part of Etsy’s revenue comes from haram. Hence our rating of questionable.
Sources
Etsy’s 2021 Ecological Impact Goals | by Chelsea Mozen | Etsy Impact
