It used to be that environmental damage or destruction was seen economically as an "externality," meaning something that was somebody else's problem; sure, it was the product of economic activity, but not something the person who created it had to pay for or worry about. For example, pollution caused by a factory belching smoke wasn't the factory owner's problem. It was something the people breathing the smoke had to deal with.

That view obtains less and less. And now the securities regulators who make the rules for financial disclosure are eliminating externalities as a loophole. That's at the heart of a new regulation by the Ontario Securities Commission. Sandra Rubin's story in today's Report On Business in The Globe And Mail spells it out clearly:

In the notice released Feb. 27, the OSC says companies traded on the Toronto Stock Exchange should quantify all environmental exposure likely to be material, no matter how remote the possibility, how far into the future and even if, individually, they are not material, but collectively could be.

The regulator says financial estimates must be provided to investors where quantitative information is “reasonably available,” and the company should explain that the estimate is highly uncertain. It should also consider providing the upper and lower ranges of financial exposure, as well as an analysis of the likelihood the event will actually occur.

Almost overnight, environmental liability has been escalated to a major governance issue. Public companies are being asked to come clean or risk a big legal mess.

That's a fundamental shift, and one that will mean an entirely different way of calculating and disclosing every kind of economic activity. Gives an entirely new meaning to the phrase "the cost of doing business."