Ruben Östlund is the rugged adventurer of Swedish film, the man who came down from the mountain to sun himself by the Med. I first meet the director on a posh restaurant terrace at the Cannes film festival. He’s easy to spot among the immaculate diners, perched at a corner table and clasping a mug of coffee as though to keep his hands warm. Östlund is bearded and rumpled and reeks of the outdoors – a child of nature come to gatecrash high society. He says he loves the Alps; he loves to ski. He spent most of his 20s shooting extreme sport videos. “Then I got bored of resorts. Too many lift queues.”

I think the ski slope’s loss might be cinema’s gain. Or possibly he’s just swapped one extreme sport for another. Östlund’s latest film, The Square, crash-landed on the festival as a last-minute addition, still warm from the editing suite (and would later make off with the all-important Palme d’Or). It’s a lovely, freewheeling piece of work – a comedy that starts out as a satire on modern art and then jumps the fence to embrace the whole world, riffing on themes of public space and personal responsibility. The film’s title refers to a utopian free zone that is marked out on the street outside a Stockholm museum. “The Square is a sanctuary of trust and caring,” the accompanying brass plaque explains. “Within it we all share equal rights and obligations.”

Before it became a film, The Square was actually a physical square. Östlund and his producer Kalle Boman installed it as a social experiment at the Vandalorum Museum in Värnamo, Sweden in 2014. On the opening night, drunken youths stole the plaque. Afterwards the square became a base for buskers, beggars and protesters. Office workers gathered to eat lunch on sunny days. Lovers proposed within its borders. In this way the installation took on a life of its own. “We were no longer in control of the square,” Östlund says. “How it is used is up to the people of the city. If they abuse it, it reveals something about them. If they treat it well, it says something interesting, too.” All these ideas would seed and water his film.

Beyond the hotel terrace, music blares and cars honk. Östlund slots a cigarette in his mouth but then can’t find his lighter. He checks his breast pocket, he checks his trousers. He appeals to the diners at a neighbouring table. Finally the publicist scurries across with a replacement. She says this has happened before and will probably happen again. “I’m like his own personal Pez-dispenser.”

The Square, as luck would have it, is loaded with such fleeting social transactions. People call out for assistance and are either obliged or ignored. Some gambits pay off and others bring disaster. The Danish actor Claes Bang gives a tremendous performance as Christian, chief curator at Stockholm’s Royal-X Museum – a man by turns insecure and honourable, vain and generous. Christian wants to establish a utopian free-zone outside his institution. But he also wants to take revenge on a pickpocket who stole his wallet and phone. From here, the film sends him down all manner of rabbit-holes. He comes slip-sliding through posh gala dinners and across polished gallery floors, bumping up against brittle American journalist Anne (played by Elisabeth Moss), and preening visiting artist Julian (Dominic West). Christian’s job is on the line and his dignity in tatters. “I’m a semi-public figure,” he wails at one point. Which in a sense we all are.

The thing is, Östlund says, he has never regarded himself as a fiction film director. The plan was always to make documentaries. He fell into drama almost by accident and scored a breakout hit with 2014’s avalanche saga Force Majeure, in which a middle-class dad abandons his family at the first whiff of danger – and then compounds the crime by lying about it. Human behaviour is what fascinates him: how people respond to a crisis; how they rub against the wider environment. For better or worse, Östlund’s characters are defined by split-second decisions. “Basically,” he says, “all my films are about people trying to avoid losing face.”

The Square, for instance, contains a fabulous scene in which Dominic West’s artist is interviewed on stage at a theatre. Julian claims to be most fascinated by “human responses to art” and yet he is thrown off his stride by a man with Tourette syndrome, who periodically bellows expletives from the floor. “Fuck off!” the man explodes. “Cocksucker!” The rest of the audience don’t know where to look.

Östlund explains that this episode, too, was lifted from experience. “I have a good friend who’s a theatre director in Sweden,” he says. “And one night I was sitting in the audience watching the play when this guy starts clapping and then shushing himself. Clapping and shushing. But very loudly, you know, everybody could hear him. So we’re all sitting there and our attention is split. What’s more interesting? The play on the stage or the man in the seat? And every time the actors did a loud scene, the man would get more excited. So now the actors are terrified! ‘Oh my God, I’m coming to the scene where I have to raise my voice and that’s only going to set him off’.” Östlund bursts out laughing. “It was probably the best play I’ve ever seen in my life.”

I tell him the theatre should have the man there every night. “Well now,” he says. “That’s basically what they did. Because it turns out that this guy is very well known. The theatre staff like him. The ensemble knows that he’s coming. ‘Our friend is here’. And that’s a beautiful thing, a tolerant thing.” Östlund reaches for a second cigarette. “The only difference now is that he wears these thick woollen gloves,” he says. “That way he doesn’t make so much noise when he claps.”

A still from Östlund’s breakout 2014 movie Force Majeure. Photograph: Courtesy Everett Collection/Rex

Or to put it another way: there’s nothing wrong with the occasional rogue ingredient. Östlund feels that the process of directing should be as loose-knit and responsive as possible. This, he says, is the Scandinavian style. Keep the script fluid, even during shooting. Encourage your actors to discover their roles in the moment. It’s a method that suited Claes Bang, a 50-year-old veteran of Danish theatre. But for Moss and West – used to the more regimented practices of US television – Östlund’s approach caused all manner of headaches.

He pulls a face. “You encourage them to improvise. You tell them: ‘Always save your energy at the beginning of the day because I want the maximum energy at the end of the day’. But even if you say this, they don’t really understand until they experience it. For Elisabeth Moss, especially, it was hard, because she thought I didn’t like what she was doing. But for me this way of working is normal.”

And how about West? “Well,” says Östlund. “Starting out, I was scared of the idea of a hierarchy of actors. I worried they would come in and demand their own big trailer and all of that. And I love Dominic – I think he’s great. But at the start of the shoot he was always coming on to set last. So in the end I took Claes to one side and said, ‘Claes, now you wait until I call you to come. Because you are the one who should come in after Dominic.’” He snorts. “It took maybe three days to settle. After that it was fine.”

The second cigarette dangles unlit from his mouth. The lighter has somehow hidden itself under a napkin. Östlund mimes mopping sweat from his brow. For a moment he thought he’d lost another one.

The director was raised far from the hurly-burly – on the small island of Strysö off the southern coast of Sweden. His mother was a teacher and painted landscapes on the side. It was she, he says, who first taught him to trust his vision, to stay true to his instincts. Then later, studying at the Gothenburg film school, he found himself electrified by Harmony Korine’s Gummo and Michael Haneke’s Code Unknown – a pair of art-house classics that caught human life in the raw. These, above all, showed him what a fiction film could achieve.

Elisabeth Moss as American journalist Anne in The Square. Photograph: Allstar/Magnolia Pictures

Apropos of nothing, he tells me a story about shooting his 2005 short Autobiographical Scene Number 6882. Ostensibly the film is about an alpha male, Martin, who wants to impress his friends by jumping off a bridge, but the drama tackles all of Östlund’s favourite themes: group-think, bravado and the fear of social disgrace. An old man warns Martin not to jump, pointing out that a diver recently died in the exact same spot. And as a result, Martin finds that he really can’t walk away.

Östlund decided he wanted the camera dangled out over the water, shooting the side of the bridge from mid-air. This required the crew to construct a tower with an extendable arm, a job that took all day. When he saw the image on the monitor, though, he realised that the shot was all wrong. He was an untested young film-maker overseeing a crew of old hands. He didn’t want to admit defeat.

“Should I say ‘Thanks, that’s great’ and just shoot it anyway – knowing that I was never going to use that image? No, because if I did that I’d be exactly like the man in my film, not wanting to lose face. So I had to gather everyone together and say: ‘Look, I’ve made a mistake.’ I was afraid there would be a mutiny, that I’d never work again. But what actually happened was that the crew suddenly respected me in a way they hadn’t before. By the act of admitting frailty, I came away with more authority.”

His next project is called Triangle of Sadness. It’s about two catwalk models and will be his first predominantly English-language production. The success of Force Majeure and The Square have put the director on the studios’ radar and I have the sense he may be drifting westwards, towards an American career. He accepts that he’s not entirely ruling it out. But the man goes with conditions; he has his own moral code.

He refuses, for example, to kill anybody on screen. “So many directors kill people left and right. I have never experienced anything like that in my life. And I want my films to be true to my experience.”

Occasionally an American producer will send him a script. If it’s littered with corpses, they’ll swear blind it’s a love story. He wants no part of it. “The industry is perverted when it comes to violence. Of course it’s an easy way to create a dramatic event. But my view is that human beings are copycats – we imitate what we see. If you’re reproducing pictures of men running around with guns, people will imitate that. Look at any high-school shooting. The images the killers take of themselves in the mirror. It’s so obvious to me that they’re copying a character.”

He draws on his cigarette. “Apparently it’s the same with our depictions of romance. People who love romantic comedies – they’re the ones who get divorced the most. They move on to the next partner. They move on to the next romcom.”

Our hour together is up; we must move on ourselves. I gather my notepad, phone and MiniDisc and leave the director to finish his cigarette at the table – and it is only later, back on the Croisette, that I realise I’ve inadvertently stolen his replacement lighter as well. I really ought to take the thing back except I don’t think I can face it. What would Östlund have done? How would his characters have responded? Have I, in some small way, broken the social rules of The Square?

Dominic West (centre) as artist Julian in The Square. Photograph: Allstar/Magnolia Pictures

Months later I speak to the director again. This time he’s in London, poised to fly out to LA for the Oscars. The Palme d’Or, it transpires, was only the beginning. After The Square’s first appearance, Östlund took it back to the editing suite, switched things around, tightened the last 20 minutes, and then submitted it for the Academy Awards. “It’s like being a theatre director, right?” he says. “The piece is constantly evolving and changing. It’s important not to have too much reverence.” He says he has high hopes of winning the best foreign film Oscar (“I want to tick this big thing off my list”). On the night, though, he loses out to the Chilean drama A Fantastic Woman.

But in the intervening 10 months the landscape has shifted. Hollywood has grown darker; the US film industry is in spasms. The toppling of Harvey Weinstein has exposed a culture of abuse, with a recent survey reporting that 94% of female employees have experienced sexual harassment or assault. Östlund admits that he had heard stories in the past. He just hadn’t realised how bad it could be. “Again, we have to look at the kind of images that we reproduce. Young violent men. Women as sexual objects. So we can’t only put the blame on certain individuals. We have to put the entire culture in context. How did we get here? What do we do now?”

I wonder if he knows what he’s getting into. Come to think of it, what’s he doing in the Oscar race anyway? Isn’t the notion of an awards contest antithetical to the communal spirit of The Square? It involves one picture beating out the other nominees, hogging the glory, taking the whole space for itself.

“That’s very harsh,” he sighs. “But you are right. The nominees all share the attention beforehand – and that is why awards are good. They bring attention to good and interesting films. But you’re right, in the end it’s unfair. Life is unfair.”

While we’re on the subject of moral quandaries, I figure I can ask him to resolve one of my own. Somewhere, probably, I still have his cigarette lighter. Ought I to have brought it back to him that day in Cannes? It’s a trifling thing but it’s been nagging at my conscience.

Östlund ponders this dilemma like a cross-legged sage. He weighs up the evidence then delivers his verdict. “I don’t think you did anything wrong,” he says finally. “One, because the value of the lighter was such that you didn’t need to bring it back. And two, because don’t you think lighters change hands all the time? Lighters are part of the social contract between us. If it’s my lighter, it’s your lighter. I share it with you.”

The Square is out in the UK on 16 March