Add an Airtag to an iPhone managed by Apple Business Essentials

I have a staff member at my job who is using an iPhone managed by our Apple Business account. They purchased several airtags to use for recently purchased equipment. When they try to add the airtag to their iPhone, they're prompted with a message that says "Upgrade your account security". When they tap on the message, it takes them to the Sign-In & Security section under iCloud settings where they can't proceed any further. Is this even possible?

I've seen others mention that they need 2FA setup, but I'm pretty sure that's setup already. There is no option for 2FA under Sign-In & Security for managed devices.

Not sure what else to try. Any help would be appreciated. Thank you.