Assign sensitivity labels to Microsoft 365 groups in Azure Active Directory Azure Active Directory (Azure AD), part of Microsoft Entra, supports applying sensitivity labels published by the Microsoft Purview compliance portal to Microsoft 365 groups.
In addition to using sensitivity labels to protect documents and emails, you can also use sensitivity labels to protect content in the following containers: Microsoft Teams sites, Microsoft 365 groups (formerly Office 365 groups), and SharePoint sites.
When you configure a label policy, you can:
Choose which users and groups see the labels. Labels can be published to any specific user or email-enabled security group, distribution group, or Microsoft 365 group (which can have dynamic membership) in Azure AD.
Reference:
https://learn.microsoft.com/en-us/microsoft-365/compliance/sensitivity-labels-teams-groups-sites
https://learn.microsoft.com/en-us/microsoft-365/compliance/sensitivity-labels?view=o365-worldwide