Closing the Sustainable Development Implementation Gap at the Firm Level: A Diagnostic Instrument and Validation Protocol for SDG ‐Aligned, Planetary‐Boundary‐Bounded Firm Practice in Small and Medium‐Sized Enterprises

ABSTRACT Despite the United Nations 2030 Agenda's call for firm‐level Sustainable Development Goal (SDG) implementation, no validated diagnostic exists to assess whether small and medium‐sized enterprises (SMEs) have developed the operating capability that SDG‐implementation adequacy requires against absolute biophysical reference points, rather than relative improvement against firm‐specific baselines. This paper develops Planetary Boundary Operating Capability (PBOC), a firm‐level diagnostic construct comprising three hierarchically structured sub‐capabilities, Scale‐aware Operations, Distribution‐just Practices, and Regenerative Allocation, grounded in the Daly–Farley ends–means hierarchy and the firm‐level planetary‐boundaries literature. PBOC measures institutionalised managerial capability oriented toward operating within absolute biophysical limits; it is a capability‐readiness proxy, not a certification that a firm operates within any planetary boundary, and is designed to be triangulated against objective environmental data. Its items directly operationalise targets under SDG 6 (water), SDG 7 (affordable and clean energy), SDG 8 (decent work), SDG 12 (responsible consumption and production), SDG 13 (climate), SDG 15 (life on land), and SDG 17 (partnerships); SDGs 1 and 3 enter only as downstream outcomes used for nomological validation, under an explicit three‐tier scope taxonomy. We contribute (i) a theoretically derived candidate 36‐item instrument, including new items on boundary downscaling and firm‐level budget governance; (ii) a formal derivation of the scale–distribution–allocation sequence as a necessary‐condition structure, distinguished from additive and parallel alternatives; and (iii) a pre‐specified two‐phase validation protocol for Taiwanese SMEs, Phase 1 psychometric refinement (content validity, Q‐sort, exploratory and confirmatory factor analysis) and Phase 2 nomological validation (partial least squares structural equation modelling and Necessary Condition Analysis), with target samples, competing‐model comparisons, common‐method‐bias remedies, and analytic thresholds fixed in advance. This is a study protocol: it reports the construct, instrument, hypotheses, and analysis plan; no data have yet been collected and no empirical results are reported. The protocol offers sustainable development scholarship a diagnostic for CSRD/ISSB/TNFD transition support and Necessary Condition Analysis as a method for adjudicating hierarchical SDG‐implementation claims.