Processes in Microsoft 365 for setting up Office apps, redeeming product keys, and activating licenses.
If your version of MacOS is Big Sur (11.7.11), then the error you are seeing is caused by an update on the 13th of July, if you are unable to upgrade your MacOS to a newer compatible version (12 or higher) your Office apps will go into Read Only mode, on the link below they provide full details on that update.
If you are unable to upgrade your MacOS version to 12 or higher, then the only option is to use the free Office apps in a web browser.
When you use the free Office apps in a web browser, your files would be stored on your OneDrive account online (https://onedrive.live.com/), not on your Apple Mac, but you can download them to your computer after you have created/edited the documents.