I have reached out to support to make sure, YES, its a bug with 11.2, however they advice below, As long as your battery capacity and cycle count are reading normally, there is no need to be alarmed. You can use your mackbook normally.

I brought a macbook air m1 (8GB, 8Core 7GPU) 3 weeks back and it default comes with Big Sur 11.0.1 as I remember, and I update this to 11.2 couple of days back. After the update, I notice this "Service Recommended" icon. I've did go through NVRAM, SMC reset. But its still there, and I went on a Diagnostic test, no issues found either. Pleas note that, after the update, battery has heated a couple of hours later in the same day while working on that day, I suddenly restarted this and heat issue been fixed. After I did see this icon and continuously. For more details, I still gotta below, Health Information:  Cycle Count: 9  Condition: Service Recommended  Maximum Capacity: 100% I strongly believe this is a bug with 11.2, Apple please fix this or send proper guidance how to overcome this.