Amount of System Data on MacBook Air M1 is Huge

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The final word from Apple on Managing the " System Data “ Category

System Data: Contains files that don’t fall into the categories listed here. This category primarily includes files and data used by the system, such as log files, caches, VM files, and other runtime system resources. Also included are temporary files, fonts, app support files, and plug-ins. 

You can't manage the contents of this category. The contents are managed by macOS, and the category varies in size depending on the current state of your Mac.

There are areas of the Operating System which we users have control over and that is the User Account Folder ( Home Folder )

All other areas are not accessible 

It is generally a good computer practice to alway keep at least 20% to 25% of the Total Drive Capacity’s as Empty Space. Allowing the computer to drop below these guidelines may eventually, cause unintended consequences.

There is Purgeable Space and there is Empty Space.

Purgeable Space which is Controlled by the Operating System. When the Operating Systems decides the computer needs additional Empty Space, it will move a portion of the Purgeable to Empty space

AFAIK - there is no User Actions to hasten this transition from Purgeable to Empty Space

It can day or longer before this will occur.

The links below will assist in identifying what is taking up space on the Internal Drive and provide possible ways to remove data that is under the direct control of the User ( Home Folder ) . 

Rebuild the Spotlight index on your Mac

What is “Other” storage on a Mac, and how can I clean it out?

Free up storage space on your Mac

GrandPerspective 

How to delete Time Machine snapshots on your Mac.  

Often caused if the Time Machine Drive has not been attached  to the computer and TM Backup is set to run on a Schedule. 

TM Backup will make Snap Shot on the Internal Drive awaiting the TM Backup Drive to be attached. 

Only then will the Snaps Shots be transferred to the External Drive and deleted the Internal Drive.

View APFS snapshots in Disk Utility on Mac - Apple Support (CA)

See used and available storage space on your Mac

Locate backups of your iPhone, iPad, and iPod touch

If there a Suite of Adobe Applications  used on this computer ?

They may create some very large cache files that can be removed. Though, the Adobe cache files will be recreated as the Applications needs them.

https://helpx.adobe.com/ca/premiere-pro/kb/clear-cache.html

The same clearing of System Cache files can be archived by booting into Safe Mode

They will be recreated as the System Requires 

Delete your internet CACHE once in a while!

The System Data is where you User Account( Home Folder ) on this computer resides

One may need to do some serious house cleaning of the Personal Files, like Music, Videos, Documents etc as well as Application

Do Not use a Third Party Disk Cleaner as they tend to make a Bad Situation even worse

To Delete the System Data all together would require using the Remove All Content and Setting

Effectively doing a Rest for Apple Silicon Computer and then starting over

I do to think this is what your intended to write but there it is

If you use Safari then it;s menu bar 'Clear History' once in while!