I cannot figure out how to source the .env file

No, the message isn’t false, it checks for the file .env at the same place were the executable is located. If that is not there it will show that message.

It will also show that message even if you have export ENV=Value there or any other means of env values provided for the executable, it is docker -e or some shell script.

It will only not show if the file .env is actually right there next to the executable.