A commonly proposed alternative to SLS (top image) in shampoo is cocamidopropyl betaine (bottom image).
A key reason why cocamidopropyl betaine is used is because it is less irritating. However the reduction in irritancy does come at a price, a reduction in efficacy.
How and Why is cocamidopropyl betaine less effective?
Remember that both SLS and cocamidopropyl betaine are both surfactants. Their role is to form micelles which help to dissolve oil from hair (jog your memory with this post). You really must understand what micelles are before you go any further so I will suggest again that you really must read this post (Really, yes I linked it twice, and here it is again :) this post).
If you have a look at the chemical structures above, you may notice that the long zig zag portion of the SLS is shorter than that of the cocamidopropyl betaine. This little zig zag portion is the tail part of the surfactant (orange in the diagram below). A shorter tail allows the micelle to form easily while a longer tail, not so much!
Therefore since cocamidopropyl betaine is not as effective at forming micelles, it is therefore not as effective at dissolving oil and therefore not a particularly strong cleanser.
Does this mean that cocamidopropyl betaine is not good?
No, it means that cocamidopropyl betaine is just milder (Journal of Surfactants and Detergents, pp 235-239, 1998) leaving some of the oil layer undisturbed (not necessarily a bad thing for dry hair) and not necessarily removing all build up.
How can the cleaning power of cocamidopropyl betaine be improved?
Commonly you will find it along with other surfactants. It can also be added (and usually is) to SLS containing shampoos to reduce irritancy. A very common shampoo combination is SLS, SLES and cocamidopropyl betaine which produces a suitably cleansing and low irritation formula.
Is cocamidopropyl betaine irritating?
It is known widely as very mildly irritating, much much much less than SLS. However, there are some people, as always, who will be very sensitive to it ( Dermatitis, pp157-60, 2008). Additionally poor manufacturing can lead to inclusion of by products that are irritating. However on the grand scale as I said before, cocamidopropyl betaine is significantly less irritating than SLS.
Next up: Alternatives to sulfate shampoo: Castile Soap!