The shift toward sustainable business practices encourages SMEs to integrate environmentally oriented practices into their supply chains in order to strengthen competitiveness. This study examines the effect of Green Supply Chain Management (GSCM) on competitive advantage, both directly and through Green Innovation, at Sasih Bali, a culturally based fashion SME. A quantitative causal design was employed. Data were collected from 130 Sasih Bali consumers using purposive sampling and analyzed with SEM-PLS in SmartPLS 4. The results show that GSCM has a positive and significant effect on both competitive advantage and Green Innovation. Green Innovation has a positive and significant effect on competitive advantage and partially mediates the effect of GSCM on competitive advantage. These findings support the Natural Resource-Based View, indicating that environmentally oriented capabilities can become a source of competitive advantage through green innovation that remains embedded in local cultural identity.
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