Abstract To achieve the EU climate and energy objectives, a transition towards a future sustainable energy system is needed. The integration of the huge potential for industrial waste heat recovery into smart energy system represents a main opportunity to accomplish these goals. To successfully implement this strategy, all the several stakeholders' conflicting objectives should be considered. In this paper an evolutionary multi-objective optimization model is developed to perform a sustainability evaluation of an energy system involving an industrial facility as the waste heat source and the neighbourhood as district heating network end users. An Italian case study of heat recovery from a steel casting facility shows how the model allows to properly select the district heating network set of users to fully exploit the available waste energy. Design directions such as the thermal energy storage capacity can be also provided. Moreover, the model enables the analysis of the trade-off between the stakeholders’ different perspectives, allowing to identify possible win-win solutions for both the industrial sector and the citizenship.