Hello,
This option works for the Footer widgets added in the Appearance > Widgets > Footer column 1, Footer Column 2, and so on.
Your footer is one column only created by means of HTML blocks in Elementor that is why the footer is not collapsed.
You can divide the main HTML blocks into three different HTML blocks, set three columns in the Theme Settings > Footer, and then add these three blocks in each Footer column accordingly. In this case, this option would work.
Best Regards