In the 1980s the mantra for business was Greed is Good. Now, for many in the corporate sector it has become Green is Good. Firms are increasingly recognising the benefits of becoming responsible environmental citizens.

John Llewellyn, senior economic policy adviser at Lehman Brothers, the investment bank, and author of a report, The Business of Climate Change, puts it simply. “The first step in the argument is that the science is almost certainly right and that the drumbeat of the scientific evidence is getting louder all the time,” he says. “Politicians are going to be under increasing pressure to take action, and it is this action, perhaps even more than climate change itself, that businesses will have to respond to.

“For firms it is good to get in early, to recognise what policy changes are likely and what is the best way to respond to them.”

Even with investors preoccupied by the worldwide credit crunch, they are paying increasing attention to what firms are doing about the environment. Llewellyn sees this from wealthy individuals investing family money, for whom the green issue is an increasingly important one in deciding where to place their funds. But it is spreading across the investment community.

“Investment funds are getting the message,” says Llewellyn. “They are under pressure from the pension funds and insurance companies, the people who own Britain and have to look to the longer term.”

The Association of British Insurers, which represents the big insurers, is committed to incorporating climate change into its investment strategies.

This includes “considering the implications of climate change for company performance and shareholder value, and incorporating this information into our investment decision-making process; encouraging appropriate disclosure on climate change from the companies in which we invest; encouraging improvements in the energy-efficiency and climate resilience of our investment property portfolio; communicating our investment beliefs and strategy on climate change to our customers and shareholders; and sharing our assessment of the impacts of climate change with our pension fund trustees”.

Responding and adapting to climate change is a more urgent matter in some sectors than in others. “The insurance industry must do more now to understand and actively manage climate change risk,” says a recent report for Lloyd’s of London, the insurance market.

“An increasing wealth of scientific evidence is available to predict the impact of changing weather patterns and future climate change on the insurance industry,” the report continues. “So far, efforts to do so have been patchy. It is not too late to change, but change is long overdue.”

That was also the broad message recently for the wider business community. On May 1, more than 1,700 business leaders attended “May Day summits” across the country, organised by Prince Charles’s Business in the Community (BITC) initiative. As well as the Prince of Wales, the summits were addressed by Gordon Brown, Sir Michael Rake, chairman of BT, Sir Stuart Rose, chief executive of Marks & Spencer and chairman of BITC, and Dr Rajendra Pachauri, chairman of the Intergovernmental Panel on Climate Change.

But if the attendance showed enthusiasm among firms for the green agenda, everybody is aware that much more needs to be done. At the 12 summits across the UK, linked to a national hub event in London attended by 160 chief executives, firms reported back on what they had done since the inaugural summit a year ago and shared examples of best practice.

Only 25% of members of the so-called May Day Network reported back on the pledges they made at the first such summit in May 2007, so companies were challenged to do more to turn Britain into a low-carbon economy. By May 2009, members of the network are expected to calculate and report their carbon footprint. As Stephen Howard, chief executive of BITC, puts it: “The combined leadership of UK businesses will be an essential component of any efforts to tackle the global crisis of climate change.”

Greencare H2O

Adam Warren's firm, Greencare H2O, produces watercooling and filtering systems for restaurants that turn ordinary tap water into a premium product. “It is absurd to ferry bottles of water from all over the world,” said Warren, above. “It generates greenhouse gases, waste and expense.”

The profits on bottled water are, however, far from absurd with the market doubling every five years and now worth £2 billion a year. Greencare H2O’s idea is to exploit customers’ desires for bottled water and the growing green ethic by giving restaurants a device that can chill, filter and even carbonate tap water – and then put it in a branded bottle, which restaurants can charge for or give free to customers.

Warren started Greencare H2O with his own funds from the sale of his last business start up, Greencare Environmental, which provides commercial washroom services, and is now in talks with investors to fund a big expansion.

“Last year saw a turnover of £2.5m with an overall loss because of upfront investment costs, but in 2007-08 we expect to break even on a turnover of £3.6m,” says Warren.