Executive Summary
For decades, asset-intensive industries have monitored equipment to improve reliability, reduce unplanned downtime, and cut maintenance costs. Those priorities remain critical. But today, stakeholders expect more. Investors, regulators, and society now demand verifiable reductions in energy use and carbon emissions, alongside the traditional goals of uptime and safety.
The good news? The same data we already collect to protect assets can — and should — be used to protect the planet. Energy efficiency and emissions intensity are inseparable. When we integrate ESG into equipment monitoring, we not only safeguard uptime but also generate measurable progress on decarbonization, compliance, and stakeholder trust.
Every wasted kilowatt isn’t just lost energy — it’s lost capital and lost opportunity.
From an economics perspective, every unit of energy inefficiency carries not just a direct cost but also an opportunity cost — the capital that could have been redeployed into productive or innovative uses. Real-time carbon monitoring transforms what was once a maintenance decision into an economic optimization problem, balancing marginal costs of inefficiency against marginal gains from verified abatement.
Why ESG Belongs Inside Equipment Monitoring
Energy = Emissions
Every kilowatt-hour of electricity consumed, every cubic meter of natural gas burned, every ton of steam produced translates directly into greenhouse gas emissions.
That means the load signature of a motor or the efficiency curve of a pump isn’t just a maintenance issue; it’s an emissions issue. If a 500 kW motor draws 5% more load because of misalignment, that represents wasted energy and higher emissions (Figure 1).
Economists would frame this as an externality problem: excess energy draw imposes both private costs and public costs. By embedding carbon into monitoring, firms internalize the externality, aligning operational decisions with social welfare.
Figure 1 – ESG is more than just monitoring,
Utilities and Balance of Plant Matter
Operations teams often prioritize critical production assets, while utilities like steam, compressed air, and chilled water operate in the background. Yet these “hidden” systems can represent 30–50% of total site energy use.
Steam leaks, pressure drops in compressed air systems, or oversized chillers running inefficiently can quietly add enormous energy and carbon costs. Without monitoring them, companies miss both operational and ESG opportunities.
Ignore the background systems, and you ignore half your energy and carbon risk.
Monitoring combustion efficiency in boilers, furnaces, and turbines ensures that fuel is converted into useful work with minimal waste — a direct lever on Scope 1 emissions. Integrating Leak Detection and Repair (LDAR) into the monitoring loop addresses fugitive methane losses, which carry a greenhouse impact many times greater than CO₂.
Equipment choices also matter: high-efficiency motors, optimized drive systems, and advanced lubricants establish a lower baseline energy draw, and continuous monitoring verifies that these design advantages are sustained in service. Extending asset life through proactive monitoring further reduces Scope 3 emissions by deferring the embodied carbon of manufacturing replacements.
Our approach to industrial organization stresses that under-instrumented systems represent hidden inefficiencies, akin to deadweight loss. Identifying and correcting these reduces wasted economic surplus and restores efficiency, which could translate into new investment in applied R&D as well as the expansion of a company’s labor force.
Carbon Accounting Must Be Real-Time
Annual reports built from spreadsheets and utility bills no longer meet the expectations of regulators, auditors, or investors. Continuous monitoring — granular, timestamped, and auditable — turns carbon accounting into a management tool rather than a compliance burden. If we can detect bearing wear in real time, we can and should detect emissions drift in real time as well.
From a market efficiency standpoint, annual ESG reports are lagging indicators that create information asymmetry between firms and stakeholders. Real-time, auditable monitoring eliminates this asymmetry, functioning as a credible signal in capital markets and lowering transaction costs for investors.
ESG as a Fourth Dimension of APM
Asset Performance Management has traditionally been about reliability, cost, and safety. ESG adds a fourth dimension. A bearing replacement that lowers vibration improves reliability, reduces maintenance costs, and enhances safety. But if it also reduces energy draw and emissions intensity, the action delivers fourfold value. Ignoring that dimension means undervaluing the true impact of maintenance and operational improvements.
When maintenance cuts emissions, it creates value on every margin – private and public.
Economists would describe this as capturing multiple margins of value creation. Reliability improvements yield private cost savings, while emissions reductions yield public goods benefits. Framing maintenance actions as marginal abatement cost (MAC) choices clarifies which interventions deliver the highest overall economic return.
The Gaps in Today’s Practices
Machinery Diagnostics
Condition monitoring systems are excellent at detecting mechanical or electrical anomalies. But the connection between asset condition and energy efficiency often isn’t made. A misaligned shaft increases vibration — but it also increases power draw and emissions. Most systems don’t translate that into carbon terms.
Measurement and Sensing
Industrial plants are equipped with countless flow meters, pressure transmitters, and temperature sensors. These instruments generate the raw signals required for energy and emissions accounting. Yet the data is often siloed in control systems or historians and rarely structured for ESG-grade reporting.
Utilities and Balance-of-Plant
Steam networks, compressed air systems, and cooling water loops are major contributors to site-level energy consumption. Still, they are often under-instrumented compared to process units. This creates blind spots in both reliability engineering and carbon reporting.
Carbon Accounting
Most organizations still rely on estimated emission factors and aggregated utility bills. That approach is too coarse for today’s requirements. Without continuous, verifiable measurement, ESG disclosures lack the credibility that regulators and markets demand.
Relying on coarse emission factors is economically inefficient: it treats all reductions as homogeneous when, in fact, marginal abatement costs vary widely across assets. Granular monitoring allows firms to allocate capital where it yields the lowest MAC, maximizing efficiency of emissions reduction per dollar spent (Figure 2).
Figure 2 – Achieving ESG credibility through granular monitoring.
What an Integrated Framework Looks Like
Unified Data Fabric
Monitoring must integrate data from machinery, process systems, utilities, and emissions sources — regardless of vendor or control platform. Equipment doesn’t care whose logo is on the sensor; integration must be vendor-neutral and secure.
Dual Baselines
Every asset should have both an operational baseline and a carbon baseline. For a centrifuge, the operational baseline might include vibration spectra and torque. The carbon baseline would capture kilowatt-hours per ton processed and emissions per unit output. Having both allows companies to manage performance and sustainability together.
These baselines should also reflect equipment design and material choices. High-efficiency motors, optimized drive systems, and advanced lubricants reduce friction losses and lower energy demand from the outset, setting a superior carbon baseline on day one.
Continuous monitoring ensures these design advantages are not eroded over time by misalignment, wear, or poor maintenance. Extending machine life also contributes by deferring the Scope 3 carbon embedded in replacement assets.
This mirrors applied economic framing of comparative advantage: by establishing both operational and carbon baselines, firms identify where they have relative strengths in abatement efficiency and can reallocate capital accordingly.
Predictive Insights
Predictive analytics should flag not only mechanical failures but also energy inefficiencies. Parasitic energy losses, off-design operation, creeping leaks, and declining combustion efficiency are all detectable early, and correcting them saves both money and carbon.
Credit Enablement
Verified reductions in emissions can generate carbon credits or qualify for energy incentives. But only if the data is structured, auditable, and tied to recognized methodologies. Maintenance and ESG teams alike need monitoring systems that make this translation seamless.
Verified reductions that translate into credits are a textbook case of converting private operational efficiency into tradable economic assets. Applying an environmental economics lens treats this as transforming externality reductions into property rights, which then create functioning markets.
Scalability
A monitoring framework must scale beyond pilots. Subscription models, zero-trust data architectures, and standardized onboarding workflows are critical to replicate success across fleets and facilities. Without scalability, ESG monitoring risks becoming fragmented (Figure 3).
Figure 3 – Monitoring framework maturity from basic to advanced capabilities.
A Practical Example
Imagine a pilot project on a single centrifuge at an industrial facility. Vibration and power draw were monitored in real time, and the data was structured into dual baselines: operational and carbon.
Within three months, the project delivered:
- Parasitic losses identified: Energy inefficiencies equivalent to several percent of total power draw were quantified and corrected.
- Verified emissions inventory: Real-time Scope 1 and 2 emissions for the centrifuge were calculated and validated for ESG reporting.
- Enhanced predictive maintenance: Combining vibration and energy data enabled earlier detection of imbalance, misalignment, and lubrication losses.
- Blueprint for scale: The method was designed for replication across hundreds of similar assets in the fleet.
The lesson: integrating asset health monitoring with emissions intelligence is practical, valuable, and scalable. And the same approach applies to pumps, compressors, turbines, boilers, and other energy-intensive equipment.
Why This Matters Strategically
Risk and Compliance
Regulatory frameworks worldwide are tightening. In many regions, continuous Scope 1 and 2 reporting is mandatory or imminent. Non-compliance carries legal, financial, and reputational consequences. Monitoring carbon alongside reliability closes compliance gaps.
Economists view regulatory non-compliance as a form of unpriced risk exposure. Real-time monitoring converts regulatory risk into a managed variable, reducing expected losses and volatility.
Value Creation
Every kilowatt-hour avoided is both a cost saving and an emissions reduction. When verified, it strengthens the ROI of operational improvements and may unlock credits or incentives. ESG becomes a value lever, not a cost center.
Verified efficiency gains turn ESG from a compliance burden into a profit engine.
This is dynamic efficiency in action: capital invested in monitoring yields both immediate cost savings and long-run resilience under tightening carbon regimes. In effect, it reallocates resources toward future-proof productivity.
Reputation and Trust
Stakeholders no longer accept pledges — they expect proof. Companies that can demonstrate continuous, auditable progress on emissions while improving reliability will differentiate themselves with investors, customers, and communities. In asset-intensive industries, credibility translates into license to operate.
Credibility functions as an economic rent: firms that can prove reductions earn preferential access to markets, capital, and community goodwill. Institutional economics frameworks would argue that this rent can be sustained only through verifiable, continuous proof, not pledges.
The Road Ahead
The future of asset monitoring isn’t just about uptime, it’s about uptime with a smaller carbon footprint. Reliability, efficiency, safety, and ESG are no longer separate functions. There are four dimensions of one performance contract — and they all impact the organization’s reputation.
Organizations that embrace this integrated view will:
- Detect and prevent failures earlier.
- Reduce energy waste and cost.
- Generate verified emissions reductions.
- Capture value through credits and incentives.
- Strengthen their reputation as leaders in the energy transition.
At scale, integrated monitoring becomes a source of comparative advantage. In global trade, where carbon border adjustments are tightening, firms with credible, real-time emissions data are positioned to avoid tariffs and preserve export competitiveness. In this sense, carbon belongs in equipment monitoring not just as a compliance function but as a determinant of long-run industrial competitiveness.
The path forward is clear: carbon must be brought inside the monitoring loop. It belongs right where asset management has always started — from the bolt up!
