Recently, dealing with environmental issues has emerged as a critical part of various corporate social responsibility activities. To effectively address the environmental problems along with their generic purposes of increasing competitive advantages, firms pay attention to environmental innovation. Despite the growing importance of environmental innovation for achieving competitive advantages, there remains a significant gap in understanding how firms actually accomplish this innovation. This study aims to fill this gap by leveraging Teece’s theoretical framework to identify three key components of dynamic capabilities—sensing, seizing, and reconfiguring—that facilitate the development of an effective managerial system. Specifically, this study proposes that sensing and seizing guide a firm to correctly respond to the external requests of dealing with the environmental problems so that the firm may incorporate the external pressure in the environmental innovation outcomes, while reconfiguring leads directly to the realization of environmental innovation. Using a Korean Innovation Survey that includes direct questions about environmental innovation, we construct a structural equation model, PLS-SEM, to test our hypotheses, and the findings support all the hypotheses. The contributions and managerial implications are discussed based on the findings, and some limitations in methodology are also addressed.