This paper delves into the amalgamation of Green Supply Chain Management (GSCM) practices and enforcement of German LkSG (Lieferkettensorgfaltspflichtengesetz) environmental regulations in small and medium-sized enterprises (SMEs) operating within supply chains. Incorporating literature across multiple studies, a majority have shown to be vital factors critically affecting the economic, environmental, operational, and GSCM domains. The paper has investigated the application of machine learning methods to promote the direction and strength of these factors’ influences on one another. The findings are presented in terms of SEM frameworks or models previously employed by other researchers that enable easy establishment of correlations as well as feedback loops through CLD representation. Such an inclusive approach brings new insight into regulatory adjustment dynamics among SMEs and their financial performance. Seven feedback loops explain how GSCM principles interact with regulatory compliance to produce financial results. The objective for this study is to enlighten policy makers both locally and internationally about this scenario so that they can better enforce policies that will help businesses to operate more sustainably while minimizing risks related with non-compliance.