The “impact economy” has gained traction as an expression in recent months as a term to cover a rag-bag assortment of individuals, organisations and activities that have some sort of social purpose other than profit.
On the recommendation of the Social Impact Investment Advisory Group (SIIAG) in November, the government set up an Office for the Impact Economy in the Cabinet Office. Last month, think tank New Philanthropy Capital (NPC) produced a report called Impact UK, valuing what it considers to be the impact economy at £428bn. But the government, SIIAG and NPC all use quite different definitions of the impact economy, so we don’t really know what it is.
Some, including Jay Kennedy from the Directory of Social Change, of which I am a trustee, and Peter Holbrook of Social Enterprise UK, have already raised significant issues about what the NPC definitions include and exclude. But I’d like to go further and challenge the concept of the impact economy.
Whatever the definition, the impact economy is a terrible name. It implies absurdly that the rest of the economy doesn’t have any impact, whereas this bit does. Nor is it an economy – a complex system of production, distribution and consumption of goods and services within a region or country. Rather, it describes varied activities that are extracted from the wider economy of which they are part.
NPC’s definition
NPC described its report as “the story of a national, cross-sector movement, the impact economy, united to create positive impact”. By positive impact, the think tank means the intention to prioritise public benefit over private gain.
This is a capacious definition indeed, which includes the entirety of the charitable sector and all other regulated civil society, philanthropic individuals, political parties and trade unions. It includes all kinds of businesses whose purpose is judged to be intended for some public benefit, even when they depend on making a profit and are structured as companies with overriding duties to shareholders.
Reaching for other metaphors, NPC described “a national, cross-sector community bound together by the desire to create positive impact”, and elsewhere, “an ecosystem”.
Surely, you might ask, the national movement, community or ecosystem of those desiring to increase public benefit must include all the public services that were set up precisely for that dedicated purpose? No, NPC’s impact economy excludes all government-funded services, however vital their impact for the public good. Rather a large hole in its chosen definition?
What NPC is describing is not a coherent movement, nor a community, nor an ecosystem. Many included in the definition (eg lots of charities) interact with public services, families, communities and commercial businesses, and are conceptually torn by NPC out of their true ecosystem in order to be lumped together with heterogeneous other kinds of bodies under the impact economy heading.
The vague common feature of intending to do some public good (without direct government funding) doesn’t form a movement, community or ecosystem, let alone one that is either united or bound together. A local parish church probably doesn’t see itself as bound together with Legal and General, the Conservative and Unionist Party, Fire Brigades Trade Union or Edinburgh University, all of which are part of the impact economy as defined by NPC.
The 10 heroes of the impact economy featured in the NPC report are wealthy philanthropists, and the concept only really makes sense as being tailored to that class of person. NPC’s so-called impact economy broadly comprises the different possible areas for philanthropic and social investment and engagement. Wouldn’t it perhaps be better if it just said so?
The government’s definition
The government’s Office for the Impact Economy fortunately deploys a narrower definition, albeit with the same grating jargon. It will be “a single front door for impact investors, philanthropy and purpose-driven businesses to partner with the government and grow their social impact across the UK”.
The office’s proposed aim is to create better partnerships between these more closely defined categories, government and local communities, so that, interacting together, a bigger and more strategic impact may result. Unlike NPC’s, this definition excludes the vast bulk of civil society, political parties, trade unions and all the rest, whilst leaving intractable questions about when a business is “purpose-driven” and when it isn’t.
The office will likely not be thrilled with NPC for coming up with a different and broader definition of the impact economy, including political parties.
SIIAG’s definition
Meanwhile, SIIAG, set up by the government in early 2025, defined the impact economy as “a diverse ecosystem of purposeful organisations and capital with a shared aim of delivering a strong economy in which everyone benefits”.
That is again a different definition from NPC’s, and in some ways even baggier, in that all sorts of businesses are trying to deliver a strong economy, whether or not they have an explicitly social mission. For SIIAG, it’s about “tackling barriers that inhibit economic growth”. It’s about getting government, business and communities to work better together as “co-creators of renewal”.
Unlike NPC, SIIAG treats civil society as a distinct category separate from the impact economy: noting that the government is committed to “deep collaboration between government, civil society and the impact economy”.
Confusion in civil society
All this adds up to a challenge.
To the proponents of the various bewildering definitions of the impact economy, please sort out what it is you are talking about.
Specifically, try to agree whether civil society is part of the impact economy or in a separate category because some of us are a little confused.
The implication of your chosen vocabulary that the majority of businesses in the UK have no purpose, and that the entire public sector has no impact, is unhelpful. Remember that most ordinary people are not impact economy insiders and probably find your vocabulary rather silly.
Please, try to agree if the impact economy is principally about strengthening the economy and economic growth or increasing social and public benefit and whether political parties and trade unions are part of it or not.
The aim of encouraging well-off philanthropists and investors in social and environmental causes to play a more generous and strategic role, in partnership with government and local communities, in achieving a better world is very definitely worthwhile.
But there is no need to clothe such a project in dodgy jargon, exaggerated rhetoric and phoney metaphors. Just do it.
NPC response
Erwin Hieltjes, director of data and impact at NPC and an author of the report, said: “We’re genuinely pleased by the level of engagement this has sparked. Our aim was always to start a bigger conversation, and it’s encouraging to see that happening.
“One of our core intentions was to increase visibility for a joint sector and a more joined-up impact economy, so that together we can be taken seriously and secure stronger support from the wider economy. We’re actively engaging with the report’s contributors to consider feedback from the wider community.
“In this evolving area, we welcome open dialogue and constructive critique, seeing them as valuable opportunities to learn, refine our work, and drive meaningful progress together.”
