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The relationship between environmental agencies and polluters is especially challenging in the context of micro and small sized enterprises (McSEs) in developing countries. The focus is mainly at end-of-pipe solutions that are usually unaffordable for McSEs. In order to engage them in achieving national environmental policy goals, this thesis reflexively combines the theoretical fields of Action Research and Negotiation/Conflict Resolution to fill the gaps in knowledge. A methodology was developed that is problem-driven and iterative by using longitudinal data collection rather than snap-shots. Along with a comparative study of two regional tannery cases, a new approach based on Action Research named SASI (Systematic Approach for Social Inclusion) was designed and tested for six years on cleaner production (CP) implementation with a third tannery case. The results highlight how institutional barriers in Colombia negatively affect the McSEs. The research shows that CP implementation needs comprehensive, systemic mechanisms based on participatory approaches that take into account the concerns and contexts of McSEs. Doing Action Research through SASI generated both theoretical insight and positively changed the lives of the tanners engaged in the research. It contributed to breaking the cycles of their exclusion and simultaneously facilitated innovation and use of local knowledge.