By default, for "SQL Script" recipes (as opposed to SQL Query), DSS uses the "psql" command line tool of PostgreSQL, which gives better logging abilities. You can disable this in Advanced settings (uncheck "Use psql").
DSS will not look for psql in the dss_home folder, only in the PATH used when starting DSS (which is not the PATH configured in your shell configuration files).
Also note that depending on what you want to do, the SQL query recipe might satisfy your needs (https://doc.dataiku.com/dss/latest/code_recipes/sql.html)