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Reducing and avoiding greenhouse gas emissions to prevent the planet from warming to more extreme temperatures is one of the major challenges for the next decades. Industry plays an important role to reach climate and energy policy goals by contributing to emission mitigation and energy efficiency improvement. Furthermore, the industry sector, as a part of the energy system, cannot be seen in isolation. It needs to be integrated into the complex system of the energy sector with its several technical, economic environmental and regulatory framework conditions. This study presents cost-optimal pathways for the Swiss industry to improve energy efficiency, reduce CO2 emissions and finally contribute to reaching net-zero CO2 emissions in the long term by 2050. For this purpose, the Swiss TIMES Energy System Model has been expanded with a novel modeling methodology and applied to a scenario analysis of the Swiss industry sector. The existing techno-economic modeling technique is enhanced with a novel methodology that includes detailed material flows and production processes in addition to a rich portfolio of energy technology. In this modeling approach, heat consumption and waste heat potential are assigned to single production steps with the corresponding temperature levels. These advancements in the model structure allow us to directly account for improvements in the entire production process, material efficiencies and material substitution options as well as energy technology deployment. Conventional energy systems models only have limited opportunities for this and rely on exogenous assumptions. Furthermore, waste heat recovery within the production process can now be analyzed and energy technologies are implemented with their temperature-dependent application range and efficiency. By disaggregation of the industry sub-sectors, the model is able to account for differences in structure, energy requirements and processes. Altogether, a very detailed and accurate analysis of the industry sector is possible with the developed model which ultimately contributes to an improved understanding of the industry sector and its interconnection to the entire energy system. Our analysis revealed the most important and cost-optimal measures to reach future climate and energy policy goals. The production processes and the technical equipment should be further improved to decrease the energy intensity of industrial products in the short term. In addition to this, it is cost-effective to decarbonize the process heat supply by fuel switching from fossil fuels to biomass in the short term and hydrogen and biogas in the long term. Furthermore, electrification of the process heat with high-temperature heat pumps up to 150 °C is cost-optimal in the future, especially in industry sectors with high consumption of low-temperature heat and significant potential for waste heat recovery (e.g., pulp and paper industry, food and beverage industry). To drastically reduce CO2 emissions related to the production of cement, CO2 sequestration and storage or utilization of CO2 is a competitive option in the long term. This means that industry relies on further development of these technologies, the infrastructure to store and utilize CO2, and the associated policy framework. In conclusion, the ambition to reach net-zero emissions requires technological transformation which is associated with high investments which should be addressed with support from policy. Our analysis of different net-zero pathways shows that in the cost-optimal configuration, around one million ton of CO2 emissions is still emitted in the industry sector in 2050 which are compensated by negative emissions from the other sectors. Furthermore, the industry increases its electricity consumption due to electrification of the process heat and CO2 capture and, therefore, relies on sufficient capacity in the electricity supply. Failure in the expansion of renewables ultimately leads to higher costs for the entire energy system and requires large amounts of hydrogen and biomass in the industry sector which might be partly imported. However, by substituting fossil fuels with renewable fuels, the dependency on energy imports is further reduced. The ambition to become completely independent from energy imports while achieving CO2 neutrality by 2050 imposes a challenge on the industry sector by substituting natural gas.