Unlocking Environmental Supply‐Chain Performance: The Interplay of Product Responsibility, Innovation, and SDG‐Aligned Practice

ABSTRACT Supply‐chain environmental performance increasingly depends on governance of product‐related impacts that occur beyond firms' operational boundaries. Drawing on the natural‐resource‐based view and institutional and stakeholder perspectives, this study examines whether product responsibility functions as a stewardship capability that improves environmental supply‐chain performance, and whether its payoff is contingent on adjacent sustainability capabilities and SDG‐aligned practices. Using a panel of 952 EU firms (5154 firm‐year observations; 2010–2024), dynamic system‐GMM regression models are estimated to address unobserved heterogeneity and performance persistence. Results show that product responsibility is positively associated with environmental supply‐chain performance, but its marginal benefit is significantly weaker when environmental innovation, product environmental responsible use, and SDG 12 alignment are high, indicating capability saturation and partial substitution rather than simple complementarity. The findings extend sustainability strategy research by demonstrating that product‐stewardship, environmental‐innovation, lifecycle‐use, and institutional‐alignment capabilities operate as a nonadditive portfolio, and they offer managerial guidance on sequencing and coordinating responsibility and innovation investments to avoid diminishing marginal payoffs in supply‐chain environmental upgrading.