Dhokra, an ancient and vibrant craft tradition in India, practices the ancient lost-wax casting technique to craft religious and decorative objects. The craft tradition, rooted in Bastar, Chhattisgarh, is beset by issues pertaining to market relevance, costlier raw materials, and decreasing artisan participation. The proposed research uses Dhokra as a model for design thinking and examines the utility of human-centric, cyclical processes as input for the development of environmentally sustainable craft innovations. The research follows a qualitative systematic approach, wherein there is an integration of systematic literature review, comparative case analysis, and follow-up set of primary field interviews. These are done within varied intervention settings, ranging from designer-initiated, company with social responsibility (CSR), and non-governmental organization (NGO) initiatives. The resultant set of data is then organized through thematic coding with NVivo and meaningfully synthesized through cross-case synthesis. The outcome consists of the evolution of the Empathic Co-creation for Sustainable Heritage (ECSH) paradigm. The result obtained in the current research confirms and ascertains the critical role of empathy, extent of co-creation, and prototyping capacities within the consolidation of design collaboration and artisan empowerment, as well as cultural integrity. The set of cross-case synthesis, as done through this research, ascertained the overall positive thrust toward relational immersion, cooperative problem framing, and adaptive capacity, as well as toward symbolic authenticity. The proposed ECSH paradigm enriches and enhances the existing sets of understanding within the scope of design approaches, by meaningfully merging the empathic understandings, co-creation as self-empowerment, and prototyping capacities within cultural adaptation. The proposed paradigm, within this research, aims to enable and develop environmentally sustainable craft innovation. The proposed research, within this thesis, positions Dhokra with all their meaning and complexity as `living systems within design.