You Can’t Decarbonise a Factory You Can’t See 

How IFS Zero gives manufacturers a real-time structural advantage over emissions data. 

[Unveiled at IFS Connect Tokyo alongside the IFS Cloud 26R1 release, IFS Zero is our new agentic emissions operating system built natively for manufacturing industry. This blog explores the operational challenges it was built to solve.] 

There is a scene playing out in manufacturing operations right now that leaders across the industry will recognize instantly. 

As the end of the quarter approaches, the sustainability team pulls activity data from the ERP. Someone else emails the facilities manager for manual meter readings. A third person attempts to reconcile those numbers against an energy invoice from six weeks ago. As the spreadsheet grows, confidence in the final number shrinks. 

This is how most manufacturers still report emissions today. While 97% of manufacturers now view sustainability as a strategic priority, the core systems running their operations were simply never designed to answer a fundamental question: How much did it cost the planet to make this specific part? 

That gap matters more in 2026 than it ever has. Regulation has arrived, and it is moving faster than most manufacturers can keep up with. The embedded carbon in your products now carries a direct financial cost at the EU border. Large companies are sending supplier questionnaires that expect primary emissions data, not sector-average proxies. And the manufacturers who have already built verified, traceable emissions reporting have something the rest don’t: credibility when it counts.  

Ultimately, you cannot get to net zero on estimates. 

The Emissions Landscape Manufacturers Actually Operate In 

Manufacturing’s carbon footprint is not a monolithic number. It’s the aggregate of potentially thousands of factories, production runs, shifts, and supply chains, each with a different carbon signature depending on what you make, how you make it, and where your inputs come from. 

Understanding your true footprint means working across three distinct scopes, and for manufacturers, all three are material. 

Scope 1: What Your Operations Emit Directly 

Scope 1 covers direct emissions from sources you own or control. For manufacturers, this is often the most technically complex scope to measure accurately because it’s not just meters and invoices. It involves process chemistry, equipment condition, and operational variability that changes shift to shift. 

The main Scope 1 sources in manufacturing: 

• Stationary combustion: Natural gas, coal, and fuel oil burned in boilers, furnaces, kilns, and dryers. Process heat is consistently the largest single end-use of energy across manufacturing, and for energy-intensive sectors like chemicals, glass, cement, and food processing, stationary combustion is where the vast majority of Scope 1 exposure sits. 

• Process emissions: GHGs released as a direct byproduct of chemical or physical reactions, rather than fuel combustion (e.g., calcination in cement, smelting in metals, fermentation in food and beverage). These require activity-based measurement using process-specific emission factors, not utility bill guesswork. 

• Fugitive emissions: Leaks from refrigeration circuits, compressed gas networks, and pneumatic equipment. Hydrofluorocarbon (HFC) refrigerants carry global warming potentials thousands of times higher than CO₂. A poorly maintained cooling system in a large pharmaceutical or food facility can represent a Scope 1 liability that dwarfs its entire energy bill – yet it is rarely captured accurately from invoices. 

• Mobile combustion: On-site plant vehicles, forklifts, and logistics equipment running on diesel or LPG. Often deprioritized in favor of road fleet reporting, but material for large-footprint manufacturing sites. 

The Data Challenge: The obstacle isn’t a lack of awareness; operations teams generally know where energy goes. The challenge is fidelity. Equipment consumption data lives in SCADA systems disconnected from the ERP; refrigerant top-ups are buried in service job cards; process parameters sit in isolated batch records. Getting an auditable Scope 1 number currently requires manually reconciling three or four separate systems after the fact. 

Scope 2: Purchased Energy, and Why the Method Matters 

Scope 2 covers emissions from electricity, steam, heat, or cooling purchased and consumed by your facility, typically dominated by grid electricity powering production lines, compressed air, and building systems. 

The distinction between market-based and location-based calculations is becoming critical. If you have signed a Power Purchase Agreement (PPA) or purchased Renewable Energy Certificates (RECs), the market-based method allows you to report a lower Scope 2 figure. However, this must be fully backed by audit-ready certificate documentation. As manufacturers electrify more process heat and phase out diesel equipment, Scope 2 liabilities are growing, and auditors are looking closely at the source. 

Scope 3: The 70% to 80% Problem No One Has Fully Solved 

For most manufacturers, Scope 3 represents between 70% and 80% of their total carbon footprint and in some sectors considerably more. A 2024 analysis by CDP and BCG found that corporate supply chain emissions are on average 26 times greater than combined Scope 1 and 2 emissions.  

The 15 Scope 3 categories under the GHG Protocol don’t all apply equally. For most manufacturers, the ones that are genuinely material are: 

• Category 1: Purchased goods and services – the embedded emissions in the raw materials, components, and packaging you procure. For automotive manufacturers, this is steel, aluminium, plastics, and electronics. For food manufacturers, it’s agricultural inputs. Getting it right requires supplier-level primary data, not spend-based estimation. Getting it wrong means procurement decisions that look carbon-neutral on paper but change nothing in practice. 

• Category 4: Upstream transportation and distribution – inbound logistics by road, sea, air, or rail. Particularly significant for manufacturers with global supply chains sourcing from multiple continents. 

• Category 11: Use of sold products – For capital equipment manufacturers (e.g., industrial compressors, HVAC systems, power generation), the emissions generated when customers operate your products over their working lifetime can easily dwarf your entire factory’s footprint. 

• Category 12: End-of-life treatment – landfill, incineration, or recycling at end of product life. Increasingly scrutinised as EU circular economy regulations tighten. 

The steel industry is a useful illustration of the full-scope picture. In 2024, every tonne of steel produced generated an average of 2.18 tonnes of CO₂e across Scope 1, 2, and upstream Scope 3. For manufacturers sourcing significant volumes of steel, aluminium, or other carbon-intensive materials, that upstream exposure is real and quantifiable but only if you have the data to see it. 

The honest reality is that most manufacturers currently use spend-based estimation for the majority of their Scope 3 inventory. It’s a starting point, not an answer. And the problem with spend-based estimation is structural: switching to a lower-carbon supplier doesn’t change your reported number, because the emission factor is set at sector level rather than supplier level. You can make better procurement decisions and your sustainability report won’t reflect it. 

The Regulatory Pressure Is No Longer Theoretical 

 Three major regulatory frameworks have converged, transforming compliance from a reporting exercise into an operational mandate that requires traceable, verified, and grounded data. 

1.CBAM: Carbon Is Now a Trade Issue 

The EU’s Carbon Border Adjustment Mechanism entered its definitive phase in 2026. CBAM currently covers iron and steel, aluminium, cement, fertilisers, hydrogen, and electricity. Proposals on the table would extend it to industrial machinery and heavy equipment components from 2028.  

What this means in practice: EU importers of covered goods now face a carbon price on the difference between embedded emissions in imported products and the EU Emissions Trading System price. Manufacturers who can demonstrate lower embedded emissions have a cost advantage. Those who can’t are penalised through default emission factors — which are set punitively high specifically to incentivise primary data collection. 

2.CSRD: Audit-Ready Disclosure, Not Just Reporting 

The EU’s Corporate Sustainability Reporting Directive has already landed for the first wave of large public-interest companies, covering the 2024 fiscal year. CSRD is not a tick-box exercise. It introduces Double Materiality Assessment, requiring companies to quantify both their impact on the environment and the financial impact of sustainability factors on their own performance. 

For manufacturers in or supplying into Europe, this means audit-ready Scope 1, 2, and material Scope 3 data with full traceability to source. The February 2025 Omnibus Simplification Package revised scope thresholds and reduced the number of companies formally in scope.   

As IFS Chief Sustainability Officer Sophie Graham notes: ‘Amid the ongoing debate around the Omnibus, a simple fact remains good data is good for business.’ Larger companies responsible for the bulk of emissions remain firmly in scope. And critically, if your large EU customers are in scope, supplier data requests will follow regardless. 

And critically: if your large EU customers are in scope, you will receive supplier data requests regardless of whether CSRD formally applies to you. The compliance perimeter extends up the supply chain. 

3.California SB 253 and SB 261 

Companies with annual revenues exceeding $1 billion operating in California must disclose Scope 1 and 2 emissions by 2026 and Scope 3 by 2027. The California Air Resources Board has confirmed manufacturing and industrial sectors are among the first targeted in the Scope 3 phase-in. For manufacturers with North American operations, these obligations are not optional. 

When you account for EU and California requirements together, most large manufacturers and increasingly their suppliers, are subject to mandatory emissions disclosure, wherever they’re based. As the IFS 2026 Manufacturing Trends, by 2027 environmental compliance will have become an operational imperative, not just a reporting one. 

Why the Data Problem Is Actually an Operations Problem 

Most sustainability teams in manufacturing are capable and motivated. The problem is not the people. The tools they’ve been given were designed for a different problem. 

Manufacturing emissions are created in real time, by production lines, compressors, furnaces, chillers, and inbound logistics. But they are measured after the fact, through energy bills, fuel receipts, and manual activity logs that never connect back to what was actually produced or when. The result is a number you can defend in a spreadsheet but not in an audit room. 

Manual data collection alone consumes 60% to 70% of the average sustainability reporting cycle, leaving very little time for analysis, verification, or reduction planning. By the time the number is ready, it’s months old. 

You don’t have a data problem. You have a data architecture problem. The emissions are already being captured, just not in the systems your sustainability team can access. 

What an Operational Approach to Emissions Management Actually Looks Like 

The manufacturers making real progress on emissions, not just compliance – share one characteristic: they treat emissions as operational data, not reporting data. The question shifts from ‘what were our emissions last quarter?’ to ‘which production decisions, procurement choices, and maintenance outcomes are driving our emissions, and what can we change?’ 

That requires five things that most standalone sustainability platforms cannot provide: 

• Near real-time Scope 1 capture from energy meters, IoT sensors, and process equipment, not monthly estimates from utility invoices. A furnace that fires in a given production run should generate an emissions record in that production run, matched to the order it supported. 

• Scope 2 calculation supporting both market-based and location-based methods, with renewable energy certificate accounting built in as manufacturers electrify their operations. 

• Supplier-level Scope 3 data ingestion moving beyond spend-based proxies toward primary emissions data per supplier, per material, per category. This is the only way procurement decisions actually reduce your carbon footprint rather than just rebalancing spend. 

• GHG Protocol-aligned calculation with full audit trails using the globally recognised standard for corporate emissions accounting, so your disclosures under CSRD, CBAM, or California’s SB 253 are independently verifiable and methodologically consistent across every reporting cycle. 

• Operational feedback loops, so emissions intelligence informs production scheduling, procurement decisions, and asset investment, rather than sitting in a sustainability report that no one acts on until next quarter. 

In the context of remanufacturing, the opportunity to cut emissions and create value often lives in the same operational decision. A furnace running at suboptimal combustion efficiency is a cost problem and an emissions problem. A supplier swap that reduces Category 1 embedded emissions often reduces input cost simultaneously. The decisions are the same when your data connects them. 

Introducing IFS Zero: Built for the Complexity of Industrial Emissions 

IFS Zero is an agentic emissions operating system built specifically for asset-intensive industries including manufacturing, aerospace, oil and gas, mining, energy, and transport. It doesn’t sit alongside your operations. It reads directly from them. 

Because IFS Zero is native to IFS Cloud, the data that drives production planning, asset management, procurement, and field operations is the same data that drives emissions intelligence. There’s no extraction layer. No third-party integration to reconcile. No waiting until month-end to discover you’ve missed a target. 

For manufacturers, that means: 

• Measure 

Scope 1, 2, and 3 mapped and categorised from operational source data, not from estimates. AI agents collect, validate, and classify emissions activity automatically – connecting production orders to energy consumption, procurement to Scope 3 exposure, asset utilisation to direct emissions. Live numbers from the systems that created them. 

• Disclose 

Every figure traceable to its operational origin: meter reading, IoT sensor, invoice, or system record. Full audit trails aligned to GHG Protocol. The same platform responds to a CBAM verification request, a CSRD auditor, and a Tier 1 customer sustainability questionnaire — without rebuilding the calculation for each. 

• Optimise 

Sustainability embedded in the same operational system as cost and throughput, not reported separately after the fact. When you can see the emissions intensity of each work centre, each production configuration, and each supplier, you can make decisions that improve both your carbon footprint and your margin. Decarbonisation and operational efficiency are, with the right data, the same exercise. 

Read more about IFS Zero. 

The Manufacturers Who Move Now Will Have an Advantage 

The compliance case is clear. But the competitive case is underappreciated. 

Manufacturers who build verified, traceable emissions reporting now are constructing something with lasting value: the ability to make and substantiate a product carbon footprint claim, to pass a CBAM verification, to respond to a customer’s supply chain questionnaire with primary data rather than sector-average proxies. That is already a procurement criterion for large OEMs – not a future possibility. 

The World Economic Forum has estimated that productivity and emissions losses from poorly maintained and defective industrial equipment and infrastructure cost between $1 trillion and $3 trillion in global GDP annually, with a carbon footprint equivalent to China’s total annual emissions. Nearly a third of required global emissions reductions are achievable today through operational improvement, without waiting for unproven technologies. 

That is a manufacturing story. It’s about machines running less efficiently than they should, processes consuming more energy than they need to, and supply chains carrying hidden carbon costs that nobody has quantified. The data to change it already exists inside your operations. 

IFS Zero gives you the ability to see it, trust it, and act on it, in one platform, in one closed loop, from the production floor to disclosure. 

Because you can’t get to zero on estimates. 

Ready to move from estimates to operational emissions intelligence?