Nasdaq

Nasdaq's ESG Trendsetters series highlights the top ESG professionals and teams around the world who go the extra mile in their evolving ESG roles. Discover how leading ESG companies are incorporating ESG factors into their corporate strategy, achieving meaningful impact and communicating with their stakeholders

Etsy, a global marketplace for unique and creative goods, fits the definition of a trendsetter. The company embeds ESG into its corporate strategy, integrates ESG metrics into its financial reporting, and has been named an award-winning ESG program, but Etsy is not standing still. Let's hear from the many groups responsible for Etsy's ESG program and how they look to stay ahead of the curve and set the trend. This is ESG Trendsetters.

Why is ESG important to Etsy?

At Etsy, where our mission is to 'Keep Commerce Human,' our economic, social and ecological impact goals are deeply integrated into all aspects of our business. We launched our Impact Strategy in 2017, which included setting economic, ecological, and social goals for our company that are specific, measurable and time-bound. We are values-aligned and apply the same focus and discipline to our impact metrics as we do to our financial metrics. Together, they make us stronger and more resilient.

Understanding that ESG is often a team effort, can you share a bit about how Etsy addressed this? What are the benefits of that structure of IR involvement, and do you think IR/ESG should be combined or separate?

Etsy acknowledged a few years ago that Impact/ESG are really cross-functional and require the work of many individuals in order to be fully integrated and effective. If only one team is held accountable for goals, how can these issues be truly addressed and impacted? By creating top-down goals that we are all focused on - across the company from our Board of Directors, our CEO on down - and then having cross-functional goal owners of each area, all being reported on externally, this makes us much more accountable. Everyone in the company can see how they drive the success of our impact goals.

How have you seen ESG evolve in the Investor Relations role?

There has been a very large shift in how investors view ESG. The ‘E’ and the ‘S’ have become more paramount in investors’ minds, and, as a result, we spend more time talking about these topics in our normal course conversations with both the sell side and the buy side. Our IR team spends significantly more time in ESG related work than we did just a couple of years ago - encompassing everything from message development and disclosures to investor engagement. In fact, later this year, our team will be taking on even more direct ESG/Impact reporting work as Etsy is moving data collection and disclosure ownership from our Sustainability team into the purview of our Finance team.

Can you share your top ESG focus areas over the past 12-18 months? Are there specific metrics/KPIs you use to measure your success?

We were the first e-commerce company and one of the first U.S. companies to use SASB metrics in an integrated manner in our 10K report. On the IR side, our team has a few goals that are focused on ESG.

1. Ensuring that our disclosures respond to investor needs
2. We as an IR team are as knowledgeable about the Impact/ESG metrics as we are about financial and operational KPIs
3. We incorporate Impact/ESG messaging into our ongoing investor messaging and conversations.

What advice do you have for issuers looking to tell their best ESG story?

Having an “ESG story” to me really means how are you driving long-term value creation for all of your stakeholders. The corporate strategy must dictate the ESG story, and it can only be effectively communicated when it is one and the same.

How have you sought to develop your ESG skill set, and how have you used us for support via our ESG Advisory engagement?

Starting 2020, Etsy knew we have been ahead of the game with our Impact/ESG reporting. But we questioned - was it enough? In Q2 20, Etsy’s IR team worked with Nasdaq to further understand where we fit in terms of best practices as evaluated specifically by the financial community - ultimately to ensure that, over time, these efforts further positively impact investor perceptions of Etsy and our market valuation.

Specifically, Etsy engaged the ESG Advisory team at Nasdaq to conduct the following work:

• Understand materiality, ESG ratings, index criteria & buy-side needs
• Review disclosures vs. peer benchmarking
• Help align corporate efforts to the ESG ecosystem
• Benchmark valuation, ratings and feedback to prioritize future efforts
• Develop an appropriate E&S focused investor outreach strategy
• What we learned:
• Etsy is consistently identified as ‘best in class’ by investors representing $3T in AUM/20% of our shareholder base.¹
• Etsy’s reporting 10-K process is highlighted by most as a preferred method along with detailed sustainability reports.
• Etsy’s investors endorse SASB and TCFD as reporting frameworks
• Nasdaq reviewed the top ESG capital markets perspectives and created a ‘Venn diagram’ of disclosure overlaps to reveal ways Etsy could potentially improve its ESG profile. We’re focusing on improving the ease with which investors can find out information on topics such as data privacy/security, supplier information and labor management practices - areas where we have deep commitment and activity but are less clear in our disclosures or where our disclosures may be hard to find.
• Etsy is currently under-represented in some key ESG Index funds. While hard to predict and influence, a combination of continued improvements in disclosures WITH growth in our market capitalization should enable us to capture more of this passive money over time.

What are the benefits you have seen from being a (Nasdaq) ESG Advisory client?

As you can see from this detailed information on what we learned, we found the Nasdaq work to be very helpful AND actionable. Etsy is working to round out our investor relations website to include added information and will be making some additional changes to how we think about ESG as a result of this work.

¹Examples of Etsy’s top impact rankings:

• Just100 - Ranked #52 out of 922 companies and 1st of 50 Retail companies
• Awarded a Leadership-level score of A- from CDP in 2019
• Ranked #48 in Fast Company best places to work for innovators
• Winner of Fast Company’s 2020 World Changing Ideas Awards
• Received a perfect score on the HRC Corporate Equality Index, relating the LGBTQ+ equality in the workplace

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