Panentheism (from the Greek words pan, en, and theos, literally “all-in-God”) is the view that God encompasses everything that exists, including the universe we inhabit, but there is more to God than just the universe. Panentheism shouldn’t be confused with Pantheism, which says that God and the universe are one and the same: the universe is God. In contrast, Panentheism maintains that the universe is a part of God, not the whole.
Panentheists often suggest that the relationship between God and the universe is similar to the relationship between you and your body. Your body is only part of you; there’s more to you than your body. You have a physical aspect (the body) and a mental or spiritual aspect (the mind or soul). Similarly, God has a physical aspect (the natural universe) and a mental or spiritual aspect (God’s mind or soul, which animates and directs the universe).
Another idea commonly associated with Panentheism is that God is dependent on the universe. As one influential Panentheist put it, “Without the world, God is not God.” Just as humans need a physical body in order to be complete, God needs the natural universe in order to be complete.
Panentheism is most commonly found among Eastern religions, particularly Hinduism. (Strictly speaking, Hinduism is more of a family of religions rather than one religion; some forms of Hinduism are Panentheist, while others are not.) The Hare Krishna movement, which has its roots in Hinduism, is often thought to favor a Panentheist worldview.
Panentheism has some attractive features, particularly for those who can’t stomach the nihilistic consequences of Atheist worldviews (see here). It also avoids some of the problems associated with Pantheism (see here). Even so, Pantheism and Panentheism face one serious problem together: the reality of evil in the universe.
If there is real evil within the universe—hatred, slavery, genocide, famine, and so on—then there must be real evil within God, for according to Panentheism, the entire universe is within God. As I noted earlier, Panentheists have suggested that the universe is something like a part of God. But then it seems to follow that God must be partly evil: there is some part of God’s being that is evil, precisely because there is some part of the universe that is evil. If the universe isn’t purely good, neither can God be purely good. But can a God that is less than purely good be worthy of the title “God”?
This leads directly to another problem. If God is the ultimate standard of goodness (as you’d expect God to be), it seems a Panentheist has to say that the ultimate standard of goodness isn’t purely good. But that doesn’t make a lot of sense. By what standard could the ultimate standard of goodness be judged less than purely good? There can’t be a higher standard of goodness than the ultimate standard!
The Panentheist might reply that God isn’t the ultimate standard of goodness after all. There’s some higher standard of goodness by which the universe, and therefore God, can be judged less than purely good. But if that’s the case, wouldn’t that higher standard of goodness be more worthy of the title “God”?
In sum, Panentheism struggles to reconcile the absolute goodness of God with its claim that the entire universe is within God. It seems that the only way to preserve the absolute goodness of God is to maintain that God is distinct from the universe.
(from James Anderson's "What is Your Worldview?")