Sustainable supply chain, dynamic capabilities, eco‐innovation, and environmental performance in an emerging economy

Abstract Organizations can reduce costs and achieve better performance by utilizing supply chain management. However, they face enormous challenges in building eco‐friendly supply chains for harmony with nature, especially in emerging economies. Therefore, the current study seeks to determine the direct impact of sustainable supply chain management practices (SSCM) on environmental performance in Pakistani industries. The mediating role of eco‐innovation and sustainable, dynamic capabilities and the moderating role of institutional support were also tested. The data from 309 key informants were collected using a multisource approach and analyzed via structural equation modeling. The results indicated that SSCM and eco‐innovation positively impact environmental performance, but dynamic capabilities have negatively influenced environmental performance. Additionally, dynamic capabilities and eco‐innovation mediate the relationship between SSCM and eco‐innovation, and institutional support moderates the relationships positively. These results will enhance the theoretical base in supply chain management literature by exploring the role of SSCM in environmental performance. For practical implications, these results help managers in using institutional support to achieve environmental goals.