It all looks like a terribly ridiculous impact, with the video uploader explaining the drivers didn’t have the system turned on at the moment. This seems a bit odd, so we’ll add a massive grain of salt.
One possible scenario is that the XC60 was fitted with the standard City Safety system, as described in the video, but not with the optional Pedestrian Detection featuring a complete auto brake function. If this was the case, the crossover was prepared to brake when other cars were detected in front of it, not to sense pedestrians walking into its path and bring itself to a halt. Which means it was all a ridiculous human error.
You might recall Volvo’s City Safety debuted with a bang back in 2010, when an S60 hit the back of a truck after the system didn’t apply the brakes as intended. That test uses a car without a driver and a closed course.
The automaker explained the fault was due to a battery that had been flat, with the low voltage temporarily disabling the safety system. You can see the video of that below the more recent one.
Fortunately though, the uploader also mentions the two men escaped the accident with just bruises. Regardless, we’ve reached out to Volvo, as we are seeking an official explanation for this unfortunate situation. We'll remind you the Swedish carmaker has announced the goal of eliminating all deaths in its vehicles by 2020.
UPDATE: Volvo has answered our request to help clarify the matter. As expected, all the clues point to a human error.
Here's Volvo's statement: "We're very saddened to see this footage. It appears as if the car in this video is not equipped with Pedestrian detection. This is sold as a separate package. Volvo Cars strongly recommends to never perform tests towards real humans."