Salesforce Email Tracking and Bounce Alert fails when 'Data Protection and Privacy' is enabled

Check Data Protection and Privacy if 'Make data protection details available in records' is checked and Enforce email privacy is also enabled.

In Salesforce Classic 

Go to Setup | Under Administration Setup | Company Profile | Data Protection and Privacy | Make data protection details available in records

Go to Setup search on Deliverability and on the Email Deliverability page ensure Enforce email privacy settings is checked.

In Lightning Experience

Click the gear icon and go to Setup | Company Settings | Data Protection and Privacy | Make data protection details available in records

Click the gear icon and search on Deliverability and on the Email Deliverability page ensure Enforce email privacy settings is checked.
 

Note: In case both Enforce email privacy settings and Data Protection and Privacy is not enabled in the Salesforce organization, then the issue could be different.

After it is confirmed that Data Protection and Privacy is enabled, you need to check for any of the other two declared possible root cause:
 

1. Missing Individual record on every recipient such as Contacts, Leads, Person Accounts, and Users.

1. Open any Contacts, Leads, Person Accounts, and Users record
2. Check 'Individual' field on the detail page. If not found, edit page layout and add 'Individual' field 
3. Notice if 'Individual' field is blank | Click Look up icon | New
4. Enter First & Last Name | Save
5. Open created Individual record, make sure 'Don't Track' field is unchecked as required for Email tracking purpose
6. Send a test HTML email
7. Check HTML Email Status Related List and Report, it should be capturing Email tracking details.

2. Individual record is populated with 'Don't Track' field as checked.

1. Open any Contact/Lead/Person account/User record
2. Check 'Individual' field on the detail page
3. Open Individual record assigned on it
4. Check if 'Don't Track' field as checked
5. Edit Individual record | deselect 'Don't Track' | Save
6. Go back to related Contacts, Leads, Person Accounts, and Users record 
7. Send a test HTML email
8. Check HTML Email Status Related List/Report, it should be capturing Email tracking details. If an email bounces, the Bounce Alerts should be flagged

Note: In case you don't see any of the above options, ask your Salesforce admin to execute the steps as guided.

For more details refer to the below articles:

• Enable the Enforce Email Privacy Settings Preference
• Enable Email Bounce Handling
• Email Open Tracking and Email Opt Out
• Store Customers’ Data Privacy Preferences 
• Set Up Tracking and Storage of Certain Data Privacy Preferences