["Business Strategy and the Environment, EarlyView. ", "\nABSTRACT\nFamily firms are central to sustainable development, yet the role of governance heterogeneity in shaping environmental outcomes remains insufficiently understood. Drawing on the natural resource‐based view and a governance perspective, this study examines how ownership structures condition the effectiveness of environmental protection management (EPM) and cleaner production in driving firm performance. Using panel data on Chinese listed firms (2011–2023) and system GMM estimation, we find that EPM constrains performance in some governance structures but enhances it in others. Controller ownership exerts heterogeneous effects, strengthening or weakening environmental engagement depending on incentive alignment. Moreover, cleaner production amplifies trade‐offs in certain firms while generating synergy between sustainability and financial performance in others. These findings demonstrate that environmental capabilities are governance‐contingent, advancing theory and offering actionable insights for managers and policymakers.\n"]