Since first showing up last year, M1 Macs have not been bootable from external media. There was some question as to whether this was something Apple hadn’t got around to yet or just one of those things we lost with the processor transition and the increased focus on security.
I suspected the latter, but it was the former. With macOS Big Sur 11.4, booting from an external disc now works. This is good news (via Stephen Hackett). Howard Oakley at the Eclectic Light Company has a full explanation.