Error message with the Format Function

The version of SSMS you're using is not important.
Do the two SQL Servers have the same version?

Have you tried

FORMAT(su.updatedate, 'MMM-yy', 'en-us')

or one of its variants?

An alternative:

SUBSTRING(CONVERT(VARCHAR(11), GETDATE(), 13), 4, 8) AS [Mon YY]