Environmental degradation is one of the major challenges of this ear. Alongside other actors, SMEs are taking various measures to address this issue. However, their environmental engagement varies across countries and industry sectors. Nevertheless, the majority of SMEs find it hard to take environmental protection measures proactively. Often it is attributed to their internal capacity constraints and lack of support from actors operating in their business environment. This research is about the leatherworking industry of Pakistan, an under-research economy context, where SMEs face a number of internal and external environmental barriers which limit their effective environmental engagement. Internal environmental barriers relate to limited financial resources, labour related issues and shortage of physical area. External environmental barriers range from policy related challenges to poor infrastructural facilities, societal barriers and inconsistent support from cleaner production centres. To deal with such environmental barriers some pragmatic policy measures are offered which if operationalised effectively are hoped to provide the much needed support to leatherworking SMEs for proactive engagement with environmentally responsible business practices. These policy measures relate to addressing the institutional voids in the country, improving infrastructural facilities, raising environmental awareness amongst masses, institutionalising cleaner production practices, providing platform to SMEs for getting environment-specific loaning facilities and improving the governance of tannery clusters. The paper makes an empirical contribution by uncovering the environmental barriers in an under-researched developing economy context, Pakistan. Its practical contributions are twofold. First, it offers insights to SME owner-managers for developing better strategies to address the identified barriers. Second, its findings can be useful for those formal and informal actors (local as well as international) engaged in formulating interventions focused at supporting SMEs to become environmentally responsible.