The App Sandbox security protocol is not required outside of the App Store. If this application has a App Store counter part, it is worth leaving it enabled, otherwise save some stress and hassle, by turning it off.
This application will not be Notarized as Hardened Runtime is a requirement. If disabling Hardened Runtime resolves some issues, please use the Hardened Runtime options on the "Capabilities" Page to disable parts of the Hardened Runtime protocol, until the correct combination is found for the application to function correctly.
Some applications will need entitlements to work correctly after being signed with Hardened Runtime, some do not. Make sure the application is fully tested without Entitlements before shipping.
Generally the App Sandbox is required for App Store applications, older apps may be grandfathered in, but new applications and application updates are most likely to get rejected for not using the App Sandbox security.
This is normally related to a component within the application that isn't being signed correctly. The Error message normally indicates which file it is.
If it indicates a "Resources" folder as the problem, either delete it if possible, or combine the components into the enclosing bundle's Resources folder.